Because we cannot maximize every outcome, Simon proposed that humans —a portmanteau of "satisfy" and "suffice." We set a threshold for what is "acceptable" and choose the first option that meets those criteria. This is the hallmark of bounded rationality: it is a recognition that "optimal" is often the enemy of "actionable." Conclusion
Heuristics are evolutionary adaptations designed for efficiency. In a world overflowing with data, analyzing every possible variable is paralyzing. Instead, we use strategies like the , where we judge the frequency of an event based on how easily examples come to mind. If we can quickly recall a news report about a plane crash, we judge air travel as more dangerous than it statistically is. Bounded Rationality: Heuristics, Judgment, and ...
Judgment is the process by which we evaluate evidence to reach a conclusion. Under the lens of bounded rationality, judgment is rarely a linear calculation. Amos Tversky and Daniel Kahneman’s pioneering work revealed that our judgments are heavily influenced by . The same choice can be perceived as a gain or a loss depending on how it is presented, triggering different emotional responses and risk tolerances. Because we cannot maximize every outcome, Simon proposed
Furthermore, our judgments are often anchored. The occurs when we rely too heavily on the first piece of information encountered (the "anchor") when making subsequent decisions. Whether negotiating a salary or buying a house, that initial number exerts a disproportionate pull on our final judgment, regardless of its actual relevance. Satisficing: The Pragmatic End Instead, we use strategies like the , where