Bounded Rationality
Satisficing over optimizing, decision-making with limited attention, information, and computation.
Definition
Simon's replacement for perfect optimization: realrealAdjusted for inflation, measured in actual purchasing power. decision-makers, limited in attention and computation, SATISFICE, search until something is good enough.
Key equation
Choose first option with value ≥ aspiration threshold (satisficing rule)
The intuition
Nobody solves dynamic programs at the supermarket; we use rules of thumb that are usually right and occasionally, predictably wrong. Heuristics aren't stupidity, they're rational responses to thinking being costly.
Exam tip
Position it as the umbrella: prospect theory and present bias are specific, structured departures under this general heading.
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