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Bounded Rationality: Psychology, Economics And The Financial Crises

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  • Daniele SCHILIRÒ

    (Department SEAM, University of Messina, Italy)

Abstract

This contribution focuses on the concept of bounded rationality, highlighting the role of psychology in the economic decisions. The work analyzes Simon’s approach and his notion of bounded rationality as procedural rationality. Moreover, it examines some major contributions of behavioral economics concerning cognitive biases, stressing the importance of the institutional structure in the decision process. The paper also surveys the literature of behavioral finance which has become fashionable in explaining the anomalies of financial markets, pointing out also its limits.

Suggested Citation

  • Daniele SCHILIRÒ, 2013. "Bounded Rationality: Psychology, Economics And The Financial Crises," Theoretical and Practical Research in the Economic Fields, ASERS Publishing, vol. 4(1), pages 97-108.
    • Handle: RePEc:srs:jtpref:v:4:y:2013:i:1:p:97-108
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    Cited by:

    1. Daniele Schilirò, 2012. "Bounded Rationality And Perfect Rationality: Psychology Into Economics," Theoretical and Practical Research in the Economic Fields, ASERS Publishing, vol. 3(2), pages 99-108.
    2. Johnston Richard & Hogg Ryan & Miller Kristel, 2021. "Who is Most Vulnerable? Exploring Job Vulnerability, Social Distancing and Demand During COVID-19," The Irish Journal of Management, Sciendo, vol. 40(2), pages 100-142, December.
    3. Schilirò, Daniele, 2017. "Economics versus psychology.Risk, uncertainty and the expected utility theory," MPRA Paper 83366, University Library of Munich, Germany.

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    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • B52 - Schools of Economic Thought and Methodology - - Current Heterodox Approaches - - - Historical; Institutional; Evolutionary; Modern Monetary Theory;
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • C60 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - General

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