BOUNDED RATIONALITY: PSYCHOLOGY, ECONOMICS AND THE FINANCIAL CRISES

Daniele Schiliro'

Theoretical and Practical Research in the Economic Fields, 2013, vol. 4, issue 1, 97-108

Abstract: This contribution focuses on the concept of bounded rationality, highlighting the role of psychology in the economic decisions. The work analyzes Simon’s approach and his notion of bounded rationality as procedural rationality. Moreover, it examines some major contributions of behavioral economics concerning cognitive biases, stressing the importance of the institutional structure in the decision process. The paper also surveys the literature of behavioral finance which has become fashionable in explaining the anomalies of financial markets, pointing out also its limits.

Date: 2013
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Related works:
Working Paper: Bounded rationality:psychology, economics and the financial crises (2013)
Working Paper: Bounded rationality: psychology, economics and the financial crisis (2012)
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