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Satisfice
Satisficing is a decision-making strategy or cognitive heuristic that entails searching through the available alternatives until an acceptability threshold is met. The term ''satisficing'', a portmanteau of ''satisfy'' and ''suffice'', was introduced by Herbert A. Simon in 1956, although the concept was first posited in his 1947 book ''Administrative Behavior''. Simon used satisficing to explain the behavior of decision makers under circumstances in which an optimal solution cannot be determined. He maintained that many natural problems are characterized by computational intractability or a lack of information, both of which preclude the use of mathematical optimization procedures. He observed in his Nobel Prize in Economics speech that "decision makers can satisfice either by finding optimum solutions for a simplified world, or by finding satisfactory solutions for a more realistic world. Neither approach, in general, dominates the other, and both have continued to co-exist in the ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Administrative Behavior
''Administrative Behavior: a Study of Decision-Making Processes in Administrative Organization'' is a book written by Herbert A. Simon (1916–2001). It asserts that "decision-making is the heart of administration, and that the vocabulary of administrative theory must be derived from the logic and psychology of human choice", and it attempts to describe administrative organizations "in a way that will provide the basis for scientific analysis". The first edition was published in 1947; the second, in 1957; the third, in 1976; and the fourth, in 1997. As summarized in a 2001 obituary of Simon, the book "reject dthe notion of an omniscient 'economic man' capable of making decisions that bring the greatest benefit possible and substitut dinstead the idea of 'administrative man' who ' satisfices—looks for a course of action that is satisfactory'". ''Administrative Behavior'' laid the foundation for the economic movement known as the Carnegie School. The book crosses social science disc ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Decision-making
In psychology, decision-making (also spelled decision making and decisionmaking) is regarded as the Cognition, cognitive process resulting in the selection of a belief or a course of action among several possible alternative options. It could be either Rationality, rational or irrational. The decision-making process is a reasoning process based on assumptions of value (ethics and social sciences), values, preferences and beliefs of the decision-maker. Every decision-making process produces a final choice, which may or may not prompt action. Research about decision-making is also published under the label problem solving, particularly in European psychological research. Overview Decision-making can be regarded as a Problem solving, problem-solving activity yielding a solution deemed to be optimal, or at least satisfactory. It is therefore a process which can be more or less Rationality, rational or Irrationality, irrational and can be based on explicit knowledge, explicit or tacit ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Bounded Rationality
Bounded rationality is the idea that rationality is limited when individuals make decisions, and under these limitations, rational individuals will select a decision that is satisfactory rather than optimal. Limitations include the difficulty of the problem requiring a decision, the cognitive capability of the mind, and the time available to make the decision. Decision-makers, in this view, act as satisficers, seeking a satisfactory solution, with everything that they have at the moment rather than an optimal solution. Therefore, humans do not undertake a full cost-benefit analysis to determine the optimal decision, but rather, choose an option that fulfils their adequacy criteria. An example of this being within organisations when they must adhere to the operating conditions of their company, this has the opportunity to result in bounded rationality as the organisation is not able to choose the optimal option. Some models of human behavior in the social sciences assume that hu ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Theory Of The Firm
The theory of the firm consists of a number of economic theories that explain and predict the nature of the firm, company, or corporation, including its existence, behaviour, structure, and relationship to the market. Firms are key drivers in economics, providing goods and services in return for monetary payments and rewards. Organisational structure, incentives, employee productivity, and information all influence the successful operation of a firm in the economy and within itself. As such major economic theories such as Transaction cost theory, Managerial economics and Behavioural theory of the firm will allow for an in-depth analysis on various firm and management types. Overview In simplified terms, the theory of the firm aims to answer these questions: # Existence. Why do firms emerge? Why are not all transactions in the economy mediated over the market? # Boundaries. Why is the boundary between firms and the market located exactly there in relation to size and output variety? ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Indicator Function
In mathematics, an indicator function or a characteristic function of a subset of a set is a function that maps elements of the subset to one, and all other elements to zero. That is, if is a subset of some set , one has \mathbf_(x)=1 if x\in A, and \mathbf_(x)=0 otherwise, where \mathbf_A is a common notation for the indicator function. Other common notations are I_A, and \chi_A. The indicator function of is the Iverson bracket of the property of belonging to ; that is, :\mathbf_(x)= \in A For example, the Dirichlet function is the indicator function of the rational numbers as a subset of the real numbers. Definition The indicator function of a subset of a set is a function \mathbf_A \colon X \to \ defined as \mathbf_A(x) := \begin 1 ~&\text~ x \in A~, \\ 0 ~&\text~ x \notin A~. \end The Iverson bracket provides the equivalent notation, \in A/math> or to be used instead of \mathbf_(x)\,. The function \mathbf_A is sometimes denoted , , , or even just . Nota ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Game Theory
Game theory is the study of mathematical models of strategic interactions among rational agents. Myerson, Roger B. (1991). ''Game Theory: Analysis of Conflict,'' Harvard University Press, p.&nbs1 Chapter-preview links, ppvii–xi It has applications in all fields of social science, as well as in logic, systems science and computer science. Originally, it addressed two-person zero-sum games, in which each participant's gains or losses are exactly balanced by those of other participants. In the 21st century, game theory applies to a wide range of behavioral relations; it is now an umbrella term for the science of logical decision making in humans, animals, as well as computers. Modern game theory began with the idea of mixed-strategy equilibria in two-person zero-sum game and its proof by John von Neumann. Von Neumann's original proof used the Brouwer fixed-point theorem on continuous mappings into compact convex sets, which became a standard method in game theory and mathema ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
The Quarterly Journal Of Economics
''The Quarterly Journal of Economics'' is a peer-reviewed academic journal published by the Oxford University Press for the Harvard University Department of Economics. Its current editors-in-chief are Robert J. Barro, Lawrence F. Katz, Nathan Nunn, Andrei Shleifer, and Stefanie Stantcheva. History It is the oldest professional journal of economics in the English language, and covers all aspects of the field—from the journal's traditional emphasis on micro-theory to both empirical and theoretical macroeconomics. Reception According to the ''Journal Citation Reports'', the journal has a 2015 impact factor of 6.662, ranking it first out of 347 journals in the category "Economics". It is generally regarded as one of the top 5 journals in economics, together with the American Economic Review, Econometrica, the Journal of Political Economy, and the Review of Economic Studies. Notable papers Some of the most influential and well-read papers in economics have been published in the ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
American Economic Review
The ''American Economic Review'' is a monthly peer-reviewed academic journal published by the American Economic Association. First published in 1911, it is considered one of the most prestigious and highly distinguished journals in the field of economics. The current editor-in-chief is Esther Duflo, an economic professor at the Massachusetts Institute of Technology. The journal is based in Pittsburgh. In 2004, the ''American Economic Review'' began requiring "data and code sufficient to permit replication" of a paper's results, which is then posted on the journal's website. Exceptions are made for proprietary data. Until 2017, the May issue of the ''American Economic Review'', titled the ''Papers and Proceedings'' issue, featured the papers presented at the American Economic Association's annual meeting that January. After being selected for presentation, the papers in the ''Papers and Proceedings'' issue did not undergo a formal process of peer review. Starting in 2018, papers pr ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
New Keynesian Macroeconomics
New Keynesian economics is a school of macroeconomics that strives to provide microeconomic foundations for Keynesian economics. It developed partly as a response to criticisms of Keynesian macroeconomics by adherents of new classical macroeconomics. Two main assumptions define the New Keynesian approach to macroeconomics. Like the New Classical approach, New Keynesian macroeconomic analysis usually assumes that households and firms have rational expectations. However, the two schools differ in that New Keynesian analysis usually assumes a variety of market failures. In particular, New Keynesians assume that there is imperfect competition in price and wage setting to help explain why prices and wages can become "sticky", which means they do not adjust instantaneously to changes in economic conditions. Wage and price stickiness, and the other market failures present in New Keynesian models, imply that the economy may fail to attain full employment. Therefore, New Keynesians ar ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Menu Cost
In economics, the menu cost is a cost that a firm incurs due to changing its prices. It is one microeconomic explanation of the price-stickiness of the macroeconomy put by New Keynesian economists. The term originated from the cost when restaurants print new menus to change the prices of items. However economists have extended its meaning to include the costs of changing prices more generally. Menu costs can be broadly classed into costs associated with informing the consumer, planning for and deciding on a price change and the impact of consumers potential reluctance to buy at the new price. Examples of menu costs include updating computer systems, re-tagging items, changing signage, printing new menus, mistake costs and hiring consultants to develop new pricing strategies. At the same time, companies can reduce menu costs by developing intelligent pricing strategies, thereby reducing the need for changes. Menu costs and nominal rigidity Menu costs are the costs incurred by the b ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
A Behavioral Theory Of The Firm
The behavioral theory of the firm first appeared in the 1963 book ''A Behavioral Theory of the Firm'' by Richard M. Cyert and James G. March. The work on the behavioral theory started in 1952 when March, a political scientist, joined Carnegie Mellon University, where Cyert was an economist. Before this model was formed, the existing theory of the firm had two main assumptions: profit maximization and perfect knowledge. Cyert and March questioned these two critical assumptions. Background ''A behavioral model of rational choice'' by Herbert A. Simon paved the way for the behavioral model. Neo-classical economists assumed that firms enjoyed perfect information. In addition the firm maximized profits and did not suffer from internal resource allocation problems. Advocates of the behavioral approach also challenged the omission of the element of uncertainty from the conventional theory. The behavioral model, like the managerial models of Oliver E. Williamson and Robin Marris, cons ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Profit (economics)
In economics, profit is the difference between the revenue that an economic entity has received from its outputs and the total cost of its inputs. It is equal to total revenue minus total cost, including both explicit and implicit costs. It is different from accounting profit, which only relates to the explicit costs that appear on a firm's financial statements. An accountant measures the firm's accounting profit as the firm's total revenue minus only the firm's explicit costs. An economist includes all costs, both explicit and implicit costs, when analyzing a firm. Therefore, economic profit is smaller than accounting profit. ''Normal profit'' is often viewed in conjunction with economic profit. Normal profits in business refer to a situation where a company generates revenue that is equal to the total costs incurred in its operation, thus allowing it to remain operational in a competitive industry. It is the minimum profit level that a company can achieve to justify its con ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
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