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Costly and Bounded Rationality in Individual and Team Decision-Making

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  • Radner, Roy

Abstract

The "Savage paradigm" of rational decision-making under uncertainty has become the dominant model of human behavior in mainstream economics and game theory. However, under the rubric of "bounded-rationality", this model has been criticized as inadequate form both normative and descriptive viewpoints. This paper sketches the historical roots and some current development of this movement, distinguishing between attempts to extend the Savage paradigm ("costly rationality") and the need for more radical departures ("truly bounded rationality"). Copyright 2000 by Oxford University Press.

Suggested Citation

  • Radner, Roy, 2000. "Costly and Bounded Rationality in Individual and Team Decision-Making," Industrial and Corporate Change, Oxford University Press and the Associazione ICC, vol. 9(4), pages 623-658, December.
    • Handle: RePEc:oup:indcch:v:9:y:2000:i:4:p:623-58
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    Cited by:

    1. Marengo, Luigi & Dosi, Giovanni, 2005. "Division of labor, organizational coordination and market mechanisms in collective problem-solving," Journal of Economic Behavior & Organization, Elsevier, vol. 58(2), pages 303-326, October.
    2. Werner Hölzl, 2005. "The evolutionary theory of the firm: Routines, complexity and change," Working Papers geewp46, Vienna University of Economics and Business Research Group: Growth and Employment in Europe: Sustainability and Competitiveness.
    3. Vosselman, E.G.J. & van der Meer-Kooistra, J., 2004. "Accounting for the alignment of interest and commitment in interfirm transactional relationships," ERIM Report Series Research in Management ERS-2004-095-F&A, Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus University Rotterdam.
    4. Kirsten Foss & Nicolai J. Foss, 2003. "Authority in the Context of Distributed Knowledge," DRUID Working Papers 03-08, DRUID, Copenhagen Business School, Department of Industrial Economics and Strategy/Aalborg University, Department of Business Studies.
    5. Margit Osterloh, 2007. "Psychologische Ökonomik: Integration statt Konfrontation," Schmalenbach Journal of Business Research, Springer, vol. 59(56), pages 82-111, January.
    6. Augier, Mie & March, James G., 2002. "A model scholar: Herbert A. Simon (1916-2001)," Journal of Economic Behavior & Organization, Elsevier, vol. 49(1), pages 1-17, September.
    7. Kreye, M.E. & Goh, Y.M. & Newnes, L.B. & Goodwin, P., 2012. "Approaches to displaying information to assist decisions under uncertainty," Omega, Elsevier, vol. 40(6), pages 682-692.
    8. Amir, Rabah & Lazzati, Natalia, 2016. "Endogenous information acquisition in Bayesian games with strategic complementarities," Journal of Economic Theory, Elsevier, vol. 163(C), pages 684-698.
    9. T. S. Raghu & B. Jayaraman & H. R. Rao, 2004. "Toward an Integration of Agent- and Activity-Centric Approaches in Organizational Process Modeling: Incorporating Incentive Mechanisms," Information Systems Research, INFORMS, vol. 15(4), pages 316-335, December.
    10. Anna Grandori, 2010. "A rational heuristic model of economic decision making," Rationality and Society, , vol. 22(4), pages 477-504, November.
    11. Krasa, Stefan & Williams, Steven R., 2007. "Limited observability as a constraint in contract design," Journal of Economic Theory, Elsevier, vol. 134(1), pages 379-404, May.
    12. Osterloh, Margit & Frey, Bruno S., 2019. "Dealing With Randomness," management revue - Socio-Economic Studies, Nomos Verlagsgesellschaft mbH & Co. KG, vol. 30(4), pages 331-345.
    13. K. Foss & Nicolai Foss, 2006. "The limits to designed orders: Authority under “distributed knowledge” conditions," The Review of Austrian Economics, Springer;Society for the Development of Austrian Economics, vol. 19(4), pages 261-274, December.
    14. Anna Grandori, 2013. "Models of rationality in economic organization: ‘economic’, ‘experiential’ and ‘epistemic’," Chapters, in: Anna Grandori (ed.), Handbook of Economic Organization, chapter 1, Edward Elgar Publishing.
    15. Shann Turnbull, 2017. "Grounding a Theory of Firms in the Natural Sciences," Humanistic Management Journal, Springer, vol. 1(2), pages 159-186, April.

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