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Lecture 5

ADM 1100 Lecture Notes - Lecture 5: Bounded Rationality, Satisficing, Laziness

Course Code
ADM 1100
Alan O' Sullivan

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Lecture 5 - Three models of decision-making
Three models of decision-making
(Fully) rational
Boundedly rational
Each model takes a different approach to dealing with uncertainty
Each model emphasizes a different way of combining thinking
(formulation) with doing (implementation)
(Fully) Rational Model
Emphasis: think, then do
Decision-maker should strive to be fully informed before acting
Core premise: If I am faced with the same menu of options, I will always
make the same choice
You should strive to be fully informed before acting
It downplays the role of context
Problems and objectives are clear
All relevant information is available
All alternatives can be known
All consequences and their relative importance can be account for
No decision-maker biases
Challenge to the (Fully) rational model
When information is necessarily imcomplete/imperfect
how to determine whether two situations are the same, or different?
necessarily incomplete/imperfect - info gathering can only get you so
far before you act
Individual decision-maker differences
Different people will assess the same necessarily incomplete
information in different ways
The same person may assess the same information in different ways at
different times
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