Costly and Bounded Rationality in Individual and Team Decision-making
Costly and Bounded Rationality in Individual and Team Decision-making
The ‘Savage’ paradigm of rational decision-making under uncertainty has become the dominant model of human behaviour in mainstream economics and game theory. However, under the rubric of ‘bounded rationality’, this model has been criticized as inadequate from both normative and descriptive viewpoints. This chapter sketches the historical roots and some current developments of this movement, distinguishing between attempts to extend the ‘Savage’ paradigm (costly rationality) and the need for more radical departures (truly bounded rationality).
Keywords: decision-making, uncertainty, game theory, Savage paradigm
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