Satisficing: A 'Pretty Good' Heuristic

Jonathan Brodie Bendor, Sunil Kumar and David A. Siegel
Additional contact information
Jonathan Brodie Bendor: Stanford University
Sunil Kumar: Stanford University
David A. Siegel: Florida State University

The B.E. Journal of Theoretical Economics, 2009, vol. 9, issue 1

Abstract: One of the best known ideas in the study of bounded rationality is Simon's satisficing; yet we still lack a standard formalization of the heuristic and its implications. We propose a mathematical model of satisficing which explicitly represents agents' aspirations and which explores both single-person and multi-player contexts. The model shows that satisficing has a signature performance-profile in both contexts: (1) it can induce optimal long-run behavior in one class of problems but not in the complementary class; and (2) in the latter, it generates behavior that is sensible but not optimal. The model also yields empirically testable predictions: in certain bandit-problems it pins down the limiting probabilities of each arm's use, and it provides an ordering of the arms' dynamical use-probabilities as well.

Keywords: satisficing; heuristics; bounded rationality (search for similar items in EconPapers)
JEL-codes: D83 (search for similar items in EconPapers)
Date: 2009

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Persistent link: http://EconPapers.repec.org/RePEc:bpj:bejtec:v:9:y:2009:i:1:n:9

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