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Modeling and Simulation Toolset
Published in Alex Gorod, Leonie Hallo, Vernon Ireland, Indra Gunawan, Evolving Toolbox for Complex Project Management, 2019
Sergey Suslov, Dmitry Katalevsky
Simulation modeling offers a holistic view of the project. The overall complexity of even not-so-large projects quickly exceeds human capacity to rationally assess dynamics of the system. Herbert Simon, an economics Nobel Prize laureate, introduced a concept of “bounded rationality” to emphasize this phenomenon (Simon 1972, 1979; Dörner 1996). Simulations help to produce counter-intuitive conclusions. For instance, Lee et al. (2007) investigated and found out that contrary to the widespread assumption that everything should be done as quickly as possible to minimize delays, projects may have optimal delay sizes that are inevitable but still do not significantly hurt the overall project performance. Experienced project managers intuitively account for the possibility of small project delays.
Behavioral Economics
Published in Wayne Patterson, Cynthia E. Winston-Proctor, Behavioral Cybersecurity, 2019
Wayne Patterson, Cynthia E. Winston-Proctor
Bounded rationality is the idea that when individuals make decisions, their rationality is limited by the difficulty of the decision problem, the cognitive limitations of their minds, and the time available to make the decision. Decision-makers in this view act as satisficers, as defined above, seeking a satisfactory solution rather than an optimal one. Simon proposed bounded rationality as an alternative basis for the mathematical modeling of decision-making, as used in economics, political science, and related disciplines. It complements “rationality as optimization,” which views decision-making as a fully rational process of finding an optimal choice given the information available. Simon used the analogy of a pair of scissors, where one blade represents “cognitive limitations” of actual humans and the other the “structures of the environment,” illustrating how minds compensate for limited resources by exploiting known structural regularity in the environment.
Decision making, the core of what managers do
Published in Ali Intezari, David Pauleen, Wisdom, Analytics and Wicked Problems, 2018
One of the classic and fundamental criticisms of rational decision making is the concept of bounded rationality, which is largely associated with many of the criticisms and constraints outlined in Table 6.4. The theory of bounded rationality argues that limited human cognitive capacities and the complexity of modern organizations mean the decision maker is unable to make perfectly rational decisions (Simon, 1945, 1960), and also that the influence of constraining factors beyond rationality is significant in decision making (Rosanas, 2013). Such constraints include: the vague and unclear nature of the issues under decision; misrepresented, incomplete, or unavailable information about the alternatives; disagreement on the criteria against which alternatives must be evaluated; and limited time and energy – which are all likely to lead to decision outcomes that are ‘satisfying’ and sufficient, rather than optimal (Miller et al., 2002).
Structuring Risk Assessment Process with Tallying in Aviation Safety Management
Published in The International Journal of Aerospace Psychology, 2019
After the Enlightenment, probability theory was thought as the basis of human reasoning (Gigerenzer & Goldstein, 1996), leading to the “Unbounded rationality” approach which is the oldest one of the three major approaches to human reasoning. This approach assumes that people have infinite time, memory and cognitive resources to find an optimal solution to any problem (Gigerenzer & Goldstein, 1996). In the 1950s, Simon (1956, cited by Gigerenzer & Goldstein, 1996) coined the “bounded rationality” term, which replaced the classical rationality approach by arguing that people reasons with limited cognitive capabilities and limited information about the environment. Here, human looks for a satisficing solution (a Scottish origin word formed by “to satisfy” and “to suffice” verbs) rather than the optimal.
Bounded Rationality: Managerial Decision-Making and Data
Published in Journal of Computer Information Systems, 2023
Linda M. Pittenger, Aaron M. Glassman, Stacey Mumbower, Daisha M. Merritt, Denise Bollenback
Individuals may be rational beings, however, there are bounded limits to that rationality, even if the decision maker does not realize those bounds exist.1 Economist and Nobel Prize recipient Herbert Simon coined the phrase Bounded Rationality in response to idealistic economic theories that failed to consider decisional pragmatics; limitations of the human mind (cognition and computational capabilities), time available to decide, and degree of problem difficulty and clarity. Simon’s book Administrative Behavior takes a scientific approach to decision-making and suggests that due to bounded rationality, decision makers engage in satisficing; a concept where decisions are made based on adequacy as opposed to perfection, realizing that perfection often is unobtainable and has a higher investment cost, while not always achieving a higher return on investment. The original work on bounded rationality and satisficing was within the hard sciences but expanded to the soft sciences in management research, executive decision-making, organizational behavior, and beyond.2 Cristofaro chronicled the evolution of bounded rationality in management literature.3 In the 1990ʹs, literature embraced bounded rationality as a driver for new theories in executive decision-making focusing on how information is consumed and opinions shaping decisions are formed psychologically and in the 2000s, using neuroscience. However, Cristofaro’s 2017 work does not address the role of big data, data-driven decision-making, evidence-based management, and how overwhelming volumes of corporate data fit within the context of bounded rationality.
Determinants of the choice of disposal methods among residents in urban areas in Southern Ghana
Published in Journal of the Air & Waste Management Association, 2022
Jim Kaaranmwine Anbazu, Kafui Afi Ocloo, Eric Oduro-Ofori
The study is anchored on the tenets of the theory of bounded rationality in decision-making. Bounded rationality, coined by Herbert Simon in 1947, tried to understand how human beings reason when the conditions for rationality are not met. The theory was developed from the dissatisfaction of the “comprehensive rational” decision model of choice. It postulates a process where humans make rational decisions/choices from several alternatives in the context of limited information, time, and mental capabilities (Simon, 1990) cited in Mallard. The theory relies on two critical conceptions: Firstly, the theory claims that the capacity of the human mind is limited in solving problems required for rational behavior in the real world. Thus, they do not possess all the cognitive capabilities (the inability to process all required information) to make optimal decisions. These limitations put decision-makers in a situation where they rely on alternative cognitive approaches to make decisions. Secondly, in order to overcome their cognitive constraints, humans concentrate entirely on searching for a satisfactory outcome when making these decisions (satisficing). In a given context or situation, human beings taken on a heuristic approach in making decisions. That is, they are constrained by the inability to understand the consequences or consider other alternatives thoroughly due to the limited information. As a result, they approach the situation thinking solely about their gains with little considerations on the associated losses of the situation. This confirms the assumption of the theory that people are much more sensitive to gains than to losses in situations where they must make decisions within a shorter period based on the information available and their mental capacity. The theory also opines that once a decision is made based on the idea of “satisficing,” human beings find it difficult to move away from it.