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Satisficing is a
decision-making In psychology, decision-making (also spelled decision making and decisionmaking) is regarded as the cognitive process resulting in the selection of a belief or a course of action among several possible alternative options. It could be either ra ...
strategy or cognitive
heuristic A heuristic (; ), or heuristic technique, is any approach to problem solving or self-discovery that employs a practical method that is not guaranteed to be optimal, perfect, or rational, but is nevertheless sufficient for reaching an immediate ...
that entails searching through the available alternatives until an acceptability threshold is met. The term ''satisficing'', a
portmanteau A portmanteau word, or portmanteau (, ) is a blend of wordsHerbert A. Simon in 1956, although the concept was first posited in his 1947 book ''
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 admini ...
''. 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 The Nobel Memorial Prize in Economic Sciences, officially the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel ( sv, Sveriges riksbanks pris i ekonomisk vetenskap till Alfred Nobels minne), is an economics award administered ...
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 world of
management Management (or managing) is the administration of an organization, whether it is a business, a nonprofit organization, or a government body. It is the art and science of managing resources of the business. Management includes the activitie ...
science". Simon formulated the concept within a novel approach to rationality, which posits that
rational choice theory Rational choice theory refers to a set of guidelines that help understand economic and social behaviour. The theory originated in the eighteenth century and can be traced back to political economist and philosopher, Adam Smith. The theory postula ...
is an unrealistic description of human decision processes and calls for psychological realism. He referred to this approach as
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 o ...
. Some
consequentialist In ethical philosophy, consequentialism is a class of normative, teleological ethical theories that holds that the consequences of one's conduct are the ultimate basis for judgment about the rightness or wrongness of that conduct. Thus, from ...
theories in
moral philosophy Ethics or moral philosophy is a branch of philosophy that "involves systematizing, defending, and recommending concepts of right and wrong behavior".''Internet Encyclopedia of Philosophy'' The field of ethics, along with aesthetics, concerns ...
use the concept of satisficing in the same sense, though most call for optimization instead.


In decision-making research

In decision making, satisficing refers to the use of aspiration levels when choosing from different paths of action. By this account, decision-makers select the first option that meets a given need or select the option that seems to address most needs rather than the "optimal" solution. :Example: A task is to sew a patch onto a pair of blue pants. The best needle to do the threading is a 4-cm-long needle with a 3-millimeter eye. This needle is hidden in a haystack along with 1,000 other needles varying in size from 1 cm to 6 cm. Satisficing claims that the first needle that can sew on the patch is the one that should be used. Spending time searching for that one specific needle in the haystack is a waste of energy and resources. A crucial determinant of a satisficing decision strategy concerns the construction of the aspiration level. In many circumstances, the individual may be uncertain about the aspiration level. :Example: An individual who only seeks a satisfactory retirement income may not know what level of wealth is required—given uncertainty about future prices—to ensure a satisfactory income. In this case, the individual can only evaluate outcomes on the basis of their probability of being satisfactory. If the individual chooses that outcome which has the maximum chance of being satisfactory, then this individual's behavior is theoretically indistinguishable from that of an optimizing individual under certain conditions. Another key issue concerns an evaluation of satisficing strategies. Although often regarded as an inferior decision strategy, specific satisficing strategies for inference have been shown to be ecologically rational, that is in particular decision environments, they can outperform alternative decision strategies. Satisficing also occurs in consensus building when the group looks towards a solution everyone can agree on even if it may not be the best. :Example: A group spends hours projecting the next fiscal year's budget. After hours of debating they eventually reach a consensus, only to have one person speak up and ask if the projections are correct. When the group becomes upset at the question, it is not because this person is wrong to ask, but rather because the group has already come up with a solution that works. The projection may not be what will actually come, but the majority agrees on one number and thus the projection is good enough to close the book on the budget.


Optimization

One popular method for rationalizing satisficing is
optimization Mathematical optimization (alternatively spelled ''optimisation'') or mathematical programming is the selection of a best element, with regard to some criterion, from some set of available alternatives. It is generally divided into two subfi ...
when ''all'' costs, including the cost of the optimization calculations themselves and the cost of getting information for use in those calculations, are considered. As a result, the eventual choice is usually sub-optimal in regard to the main goal of the optimization, i.e., different from the optimum in the case that the costs of choosing are not taken into account.


As a form of optimization

Alternatively, satisficing can be considered to be just constraint satisfaction, the process of finding a solution satisfying a set of constraints, without concern for finding an optimum. Any such satisficing problem can be formulated as an (equivalent) optimization problem using the
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\i ...
of the satisficing requirements as an
objective function In mathematical optimization and decision theory, a loss function or cost function (sometimes also called an error function) is a function that maps an event or values of one or more variables onto a real number intuitively representing some "cost ...
. More formally, if denotes the set of all options and denotes the set of "satisficing" options, then selecting a satisficing solution (an element of ) is equivalent to the following optimization problem : \max_ I_(s) where denotes the
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\i ...
of , that is :I_(s):=\begin \begin 1 &,& s\in S\\ 0 &,& s\notin S \end \end \ , \ s\in X A solution to this optimization problem is optimal if, and only if, it is a satisficing option (an element of ). Thus, from a decision theory point of view, the distinction between "optimizing" and "satisficing" is essentially a stylistic issue (that can nevertheless be very important in certain applications) rather than a substantive issue. What is important to determine is should be optimized and should be satisficed. The following quote from Jan Odhnoff's 1965 paper is appropriate:


Applied to the utility framework

In
economics Economics () is the social science that studies the production, distribution, and consumption of goods and services. Economics focuses on the behaviour and interactions of economic agents and how economies work. Microeconomics anal ...
, satisficing is a
behavior Behavior (American English) or behaviour (British English) is the range of actions and mannerisms made by individuals, organisms, systems or artificial entities in some environment. These systems can include other systems or organisms as we ...
which attempts to achieve at least some
minimum In mathematical analysis, the maxima and minima (the respective plurals of maximum and minimum) of a function, known collectively as extrema (the plural of extremum), are the largest and smallest value of the function, either within a given r ...
level of a particular variable, but which does not necessarily maximize its value. The most common application of the concept in economics is in the behavioral
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 ec ...
, which, unlike traditional accounts, postulates that producers treat
profit Profit may refer to: Business and law * Profit (accounting), the difference between the purchase price and the costs of bringing to market * Profit (economics), normal profit and economic profit * Profit (real property), a nonpossessory inter ...
not as a goal to be maximized, but as a constraint. Under these theories, a critical level of profit must be achieved by firms; thereafter, priority is attached to the attainment of other goals. More formally, as before if denotes the set of all options , and we have the payoff function which gives the payoff enjoyed by the agent for each option. Suppose we define the optimum payoff the solution to :\max_ U(s) with the optimum actions being the set of options such that (i.e. it is the set of all options that yield the maximum payoff). Assume that the set has at least one element. The idea of the was introduced by Herbert A. Simon and developed in economics by Richard Cyert and James March in their 1963 book ''
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 Me ...
''. The aspiration level is the payoff that the agent aspires to: if the agent achieves at least this level it is satisfied, and if it does not achieve it, the agent is not satisfied. Let us define the aspiration level and assume that . Clearly, whilst it is possible that someone can aspire to something that is better than the optimum, it is in a sense irrational to do so. So, we require the aspiration level to be at or below the optimum payoff. We can then define the set of satisficing options as all those options that yield at least : . Clearly since , it follows that . That is, the set of optimum actions is a subset of the set of satisficing options. So, when an agent satisfices, then she will choose from a larger set of actions than the agent who optimizes. One way of looking at this is that the satisficing agent is not putting in the effort to get to the precise optimum or is unable to exclude actions that are below the optimum but still above aspiration. An equivalent way of looking at satisficing is (that means you choose your actions so that the payoff is within epsilon of the optimum). If we define the "gap" between the optimum and the aspiration as where . Then the set of satisficing options can be defined as all those options such that .


Other applications in economics

Apart from the behavioral theory of the firm, applications of the idea of satisficing behavior in economics include the Akerlof and Yellen model of
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 restauran ...
, popular in New Keynesian macroeconomics. Also, in economics and
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 appli ...
there is the notion of an
Epsilon-equilibrium In game theory, an epsilon-equilibrium, or near-Nash equilibrium, is a strategy profile that approximately satisfies the condition of Nash equilibrium. In a Nash equilibrium, no player has an incentive to change his behavior. In an approximate Nas ...
, which is a generalization of the standard
Nash equilibrium In game theory, the Nash equilibrium, named after the mathematician John Nash, is the most common way to define the solution of a non-cooperative game involving two or more players. In a Nash equilibrium, each player is assumed to know the equili ...
in which each player is within of his or her optimal payoff (the standard Nash-equilibrium being the special case where ).


Endogenous aspiration levels

What determines the aspiration level may be derived from past experience (some function of an agent's or firm's previous payoffs), or some organizational or market institutions. For example, if we think of managerial firms, the managers will be expected to earn normal profits by their shareholders. Other institutions may have specific targets imposed externally (for example state-funded universities in the UK have targets for student recruitment). An economic example is the
Dixon Dixon may refer to: Places International * Dixon Entrance, part of the Inside Passage between Alaska and British Columbia Canada * Dixon, Ontario United States * Dixon, California * Dixon, Illinois * Dixon, Greene County, Indiana * Dixon, In ...
model of an economy consisting of many firms operating in different industries, where each industry is a
duopoly A duopoly (from Greek δύο, ''duo'' "two" and πωλεῖν, ''polein'' "to sell") is a type of oligopoly where two firms have dominant or exclusive control over a market. It is the most commonly studied form of oligopoly due to its simplicit ...
. The endogenous aspiration level is the average profit in the economy. This represents the power of the financial markets: in the long-run firms need to earn normal profits or they die (as
Armen Alchian Armen Albert Alchian (; April 12, 1914February 19, 2013) was an American economist. He spent almost his entire career at the University of California, Los Angeles (UCLA). A major microeconomic theorist, he is known as one of the founders of new i ...
once said, "This is the criterion by which the economic system selects survivors: those who realize positive profits are the survivors; those who suffer losses disappear"). We can then think what happens over time. If firms are earning profits at or above their aspiration level, then they just stay doing what they are doing (unlike the optimizing firm which would always strive to earn the highest profits possible). However, if the firms are earning below aspiration, then they try something else, until they get into a situation where they attain their aspiration level. It can be shown that in this economy, satisficing leads to
collusion Collusion is a deceitful agreement or secret cooperation between two or more parties to limit open competition by deceiving, misleading or defrauding others of their legal right. Collusion is not always considered illegal. It can be used to att ...
amongst firms: competition between firms leads to lower profits for one or both of the firms in a duopoly. This means that competition is unstable: one or both of the firms will fail to achieve their aspirations and hence try something else. The only situation which is stable is one where all firms achieve their aspirations, which can only happen when all firms earn average profits. In general, this will only happen if all firms earn the joint-profit maximizing or collusive profit.


In personality and happiness research

Some research has suggested that satisficing/ maximizing and other decision-making strategies, like
personality Personality is the characteristic sets of behaviors, cognitions, and emotional patterns that are formed from biological and environmental factors, and which change over time. While there is no generally agreed-upon definition of personality, ...
traits, have a strong genetic component and endure over time. This genetic influence on decision-making behaviors has been found through classical twin studies, in which decision-making tendencies are self-reported by pairs of twins and then compared between monozygotic and dizygotic twins. This implies that people can be categorized into "maximizers" and "satisficers", with some people landing in between. The distinction between satisficing and maximizing not only differs in the decision-making process, but also in the post-decision evaluation. Maximizers tend to use a more exhaustive approach to their decision-making process: they seek and evaluate more options than satisficers do to achieve greater satisfaction. However, whereas satisficers tend to be relatively pleased with their decisions, maximizers tend to be less happy with their decision outcomes. This is thought to be due to limited cognitive resources people have when their options are vast, forcing maximizers to not make an optimal choice. Because maximization is unrealistic and usually impossible in everyday life, maximizers often feel regretful in their post-choice evaluation.


In survey methodology

As an example of satisficing, in the field of social cognition, Jon Krosnick proposed a theory of
statistical survey Survey methodology is "the study of survey methods". As a field of applied statistics concentrating on human-research surveys, survey methodology studies the sampling of individual units from a population and associated techniques of survey da ...
satisficing which says that optimal question answering by a survey respondent involves a great deal of
cognitive Cognition refers to "the mental action or process of acquiring knowledge and understanding through thought, experience, and the senses". It encompasses all aspects of intellectual functions and processes such as: perception, attention, thought ...
work and that some people would use satisficing to reduce that burden. Some people may shortcut their cognitive processes in two ways: * Weak satisficing: Respondent executes all cognitive steps involved in optimizing, but less completely and with
bias Bias is a disproportionate weight ''in favor of'' or ''against'' an idea or thing, usually in a way that is closed-minded, prejudicial, or unfair. Biases can be innate or learned. People may develop biases for or against an individual, a group ...
. * Strong satisficing: Respondent offers responses that will seem reasonable to the interviewer without any memory search or information integration. Likelihood to satisfice is linked to respondent ability, respondent
motivation Motivation is the reason for which humans and other animals initiate, continue, or terminate a behavior at a given time. Motivational states are commonly understood as forces acting within the agent that create a disposition to engage in goal-dire ...
and task difficulty. Regarding survey answers, satisficing manifests in: * choosing explicitly offered no-opinion or 'don't know' response option * choosing socially desirable responses * non-differentiation or straight-lining when a battery of questions asks for ratings of multiple objects on the same response scale * acquiescence response bias, which is the tendency to agree with any assertion, regardless of its content * selecting the first reasonable looking option * randomly selecting a response * skipping items * abandoning the survey or terminating the survey early * rushing on online surveys * choosing minimally acceptable answers when verbal answers are required


See also

*
Alpha–beta pruning Alpha–beta pruning is a search algorithm that seeks to decrease the number of nodes that are evaluated by the minimax algorithm in its search tree. It is an adversarial search algorithm used commonly for machine playing of two-player games ...
*
Decision theory Decision theory (or the theory of choice; not to be confused with choice theory) is a branch of applied probability theory concerned with the theory of making decisions based on assigning probabilities to various factors and assigning numerical ...
*
Flipism Flipism, sometimes spelled "flippism", is a pseudophilosophy under which decisions are made by flipping a coin. It originally appeared in the ''Donald Duck'' Disney comic "Flip Decision" by Carl Barks, published in 1953. Barks called a practitio ...
* Frame problem * Homo economicus *
Optimism bias Optimism bias (or the optimistic bias) is a cognitive bias that causes someone to believe that they themselves are less likely to experience a negative event. It is also known as unrealistic optimism or comparative optimism. Optimism bias is commo ...
* Perfect is the enemy of good *
Portmanteau A portmanteau word, or portmanteau (, ) is a blend of wordsPrinciple of good enough The principle of good enough or "good enough" principle is a rule in software and systems design. It indicates that consumers will use products that are good enough for their requirements, despite the availability of more advanced technology. Se ...
*
Rational ignorance Rational ignorance is refraining from acquiring knowledge when the supposed cost of educating oneself on an issue exceeds the expected potential benefit that the knowledge would provide. Ignorance about an issue is said to be "rational" when the ...
*
Rationality Rationality is the quality of being guided by or based on reasons. In this regard, a person acts rationally if they have a good reason for what they do or a belief is rational if it is based on strong evidence. This quality can apply to an ab ...
* Satisfiability *
Utility maximization problem Utility maximization was first developed by utilitarian philosophers Jeremy Bentham and John Stuart Mill. In microeconomics, the utility maximization problem is the problem consumers face: "How should I spend my money in order to maximize my ...


References


Further reading

* A paper on satisficing considered from a
philosophical Philosophy (from , ) is the systematized study of general and fundamental questions, such as those about existence, reason, knowledge, values, mind, and language. Such questions are often posed as problems to be studied or resolved. Some ...
viewpoint. * * * * * * * *


External links


''Web Dictionary of Cybernetics and Systems'' definition of "satisficing"A web page dedicated to a discussion on the "satisficing" vs "optimizing" debate.Schwartz's Tech Talk ("The Paradox of Choice – Why More Is Less") given at Google on April 27, 2006
{{Instecon Rational choice theory Heuristics Organizational behavior Decision theory