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Bounded Rationality in the Economics of Organization Present Use and (Some) Future Possibilities

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  • Nicolai J. Foss

Abstract

The way in which bounded rationality enters contemporary organizational economics theorizing is examined. It is argued that, as it is being used, bounded rationality is neither necessary nor sufficient for producing the results of organizational economics. It is at best a rhetorical device, used for the purpose of loosely explaining incomplete contracts. However, it is possible to incorporate much richer notions of bounded rationality, founded on research in cognitive psychology, and to illuminate the study of economic organization by means of such notions. A number of examples are provided.

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Bibliographic Info

Paper provided by DRUID, Copenhagen Business School, Department of Industrial Economics and Strategy/Aalborg University, Department of Business Studies in its series DRUID Working Papers with number 01-13.

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Date of creation: 2001
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Handle: RePEc:aal:abbswp:01-13

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Web page: http://www.druid.dk/

Related research

Keywords: Varieties of bounded rationality; incomplete contracts; economic organization; cognitive psychology;

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References

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  1. Peter Maskell, 1996. "Localised Low-tech Learning in the Furniture Industry," DRUID Working Papers 96-11, DRUID, Copenhagen Business School, Department of Industrial Economics and Strategy/Aalborg University, Department of Business Studies.
  2. Nicolai J. Foss, 1996. "Firms, Incomplete Contracts and Organizational Learning," DRUID Working Papers 96-2, DRUID, Copenhagen Business School, Department of Industrial Economics and Strategy/Aalborg University, Department of Business Studies.
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Cited by:
  1. Morten Huse & Robert Hoskisson & Alessandro Zattoni & Riccardo Viganò, 2011. "New perspectives on board research: changing the research agenda," Journal of Management and Governance, Springer, vol. 15(1), pages 5-28, February.
  2. Cristiana Parisi, 2013. "The impact of organisational alignment on the effectiveness of firms’ sustainability strategic performance measurement systems: an empirical analysis," Journal of Management and Governance, Springer, vol. 17(1), pages 71-97, February.
  3. Foss, Nicolai J., 2003. "Bounded rationality in the economics of organization: "Much cited and little used"," Journal of Economic Psychology, Elsevier, vol. 24(2), pages 245-264, April.
  4. Pelikan, Pavel, 2006. "Markets vs. Government when Rationality Is Unequally Bounded: Some Consequences of Cognitive Inequalities for Theory and Policy," Ratio Working Papers 85, The Ratio Institute, revised 03 Sep 2006.

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