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Motivation Argument Conclusions References
Discussion
A Behavioral Model of Rational Choice
by Herbert A. Simon
Quarterly ...
Motivation Argument Conclusions References
SECTIONS
Motivation
Argument
Conclusions
References
Matheus Albergaria de Magal...
Motivation Argument Conclusions References
MOTIVATION
Traditional theories postulate an "economic man".
Characteristics:
1...
Motivation Argument Conclusions References
MOTIVATION
Simon’s (1955) main goals:
Replace the definition of global rationali...
Motivation Argument Conclusions References
ARGUMENT
Rational behavior require the following elements:
1. A set of behavior...
Motivation Argument Conclusions References
Example: Prisoners’ Dilemma
Player 2
Confess Don’t Confess
Player 1 Confess -5,...
Motivation Argument Conclusions References
"Classical" Concepts of Rationality:
1. Max-min Rule:
ˆV(ˆa) = Mins∈Sa V(s) = M...
Motivation Argument Conclusions References
ARGUMENT
The above rationality concepts make severe demands upon
the choosing o...
Motivation Argument Conclusions References
ARGUMENT
Empirical Proposition: there is a complete lack of evidence that,
in a...
Motivation Argument Conclusions References
ARGUMENT
Figure 1
"Simple" Payoff Functions
Source: Simon (1955, p.105).
Matheu...
Motivation Argument Conclusions References
ARGUMENT
Figure2
Partial Ordering of Payoffs
Source: Simon (1955, p.109).
Mathe...
Motivation Argument Conclusions References
ARGUMENT
Dynamics:
1. Aspiration level at time t depends upon the previous hist...
Motivation Argument Conclusions References
CONCLUSIONS
Main goal of the paper: to construct definitions of rational
choice ...
Motivation Argument Conclusions References
CONCLUSIONS
Impressions:
Further attempts to refine the hypothesis and related
c...
Motivation Argument Conclusions References
REFERENCES
JONES, B.D. (1999). Bounded rationality. Annual Review of Political ...
Motivation Argument Conclusions References
Thank You
Matheus Albergaria de Magalhães
matheus.albergaria.magalhaes@gmail.co...
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Discussion of the Paper "A Behavioral Model of Rational Choice", by Herbert A. Simon

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Matheus Albergaria de Magalhães - Apresentação para a Disciplina "Economia das Organizações II" (Professora Maria Sylvia Saes). Programa de Pós-Graduação em Administração da Universidade de São Paulo (PPGA-USP), Sáo Paulo, 25 de Março de 201e.

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Discussion of the Paper "A Behavioral Model of Rational Choice", by Herbert A. Simon

  1. 1. Motivation Argument Conclusions References Discussion A Behavioral Model of Rational Choice by Herbert A. Simon Quarterly Journal of Economics, v.49, Feb.1955 Matheus Albergaria de Magalhães Economia das Organizações II Universidade de São Paulo (USP) March 25th, 2015 Matheus Albergaria de Magalhães A Behavioral Model of Rational Choice (Simon 1955)
  2. 2. Motivation Argument Conclusions References SECTIONS Motivation Argument Conclusions References Matheus Albergaria de Magalhães A Behavioral Model of Rational Choice (Simon 1955)
  3. 3. Motivation Argument Conclusions References MOTIVATION Traditional theories postulate an "economic man". Characteristics: 1. Complete knowledge of relevant aspects of his environment. 2. Well-organized and stable system of preferences. 3. Excellent computation skills. Matheus Albergaria de Magalhães A Behavioral Model of Rational Choice (Simon 1955)
  4. 4. Motivation Argument Conclusions References MOTIVATION Simon’s (1955) main goals: Replace the definition of global rationality of the "economic man". New rational behavior must be compatible with information access and computational capacities possessed by organisms (including man). Matheus Albergaria de Magalhães A Behavioral Model of Rational Choice (Simon 1955)
  5. 5. Motivation Argument Conclusions References ARGUMENT Rational behavior require the following elements: 1. A set of behavior alternatives (A). 2. A subset of behavior alternatives that the organism "considers"or "perceives" ( ˙A ⊂ A). 3. Possible states of affairs, or outcomes of choice (S). 4. A payoff function (V(s)) defined ∀s∈S. 5. Information as to wich outomes in S will occur if a particular alternative a in A (or ˙A) occurs. 6. Information as to the probability that a particular outcome will ensue if a particular behavior alternative is chosen. Matheus Albergaria de Magalhães A Behavioral Model of Rational Choice (Simon 1955)
  6. 6. Motivation Argument Conclusions References Example: Prisoners’ Dilemma Player 2 Confess Don’t Confess Player 1 Confess -5,-5 -1,-10 Don’t Confess -10,-1 -2,-2 Matheus Albergaria de Magalhães A Behavioral Model of Rational Choice (Simon 1955)
  7. 7. Motivation Argument Conclusions References "Classical" Concepts of Rationality: 1. Max-min Rule: ˆV(ˆa) = Mins∈Sa V(s) = Maxa∈AMins∈Sa V(s) 2. Probabilistic Rule: ˆV(ˆa) = s∈Sa V(s)Pˆa(s) = Maxa∈A s∈Sa V(s)Pˆa(s) 3. Certainty Rule: ˆV(ˆa) = V(Sˆa) = Maxa∈AV(Sa) Matheus Albergaria de Magalhães A Behavioral Model of Rational Choice (Simon 1955)
  8. 8. Motivation Argument Conclusions References ARGUMENT The above rationality concepts make severe demands upon the choosing organism: The organism must be able to attach definite payoffs to each possible outcome. It must have the ability to specify the exact nature of the outcomes. Payoffs must be completely ordered. Either outcomes of particular alternatives must be known with certainty, or at least it must be possible to attach definite probabilities to them. Matheus Albergaria de Magalhães A Behavioral Model of Rational Choice (Simon 1955)
  9. 9. Motivation Argument Conclusions References ARGUMENT Empirical Proposition: there is a complete lack of evidence that, in actual human choice situations of any complexity, such computations are in fact performed. Basic Procedure: introduce some modifications that appear to correspond to observed behavior processes in humans, and that lead to substantial computational simplifications in the making of a choice. Matheus Albergaria de Magalhães A Behavioral Model of Rational Choice (Simon 1955)
  10. 10. Motivation Argument Conclusions References ARGUMENT Figure 1 "Simple" Payoff Functions Source: Simon (1955, p.105). Matheus Albergaria de Magalhães A Behavioral Model of Rational Choice (Simon 1955)
  11. 11. Motivation Argument Conclusions References ARGUMENT Figure2 Partial Ordering of Payoffs Source: Simon (1955, p.109). Matheus Albergaria de Magalhães A Behavioral Model of Rational Choice (Simon 1955)
  12. 12. Motivation Argument Conclusions References ARGUMENT Dynamics: 1. Aspiration level at time t depends upon the previous history of the system. 2. Payoffs in a particular trial may depend not only on the alternative chosen in that trial but also on alternatives chosen in previous trials. 3. The consequences that the organism experiences may change the payoff function. 4. One choice method may be to select a particular alternative and experience its consequences. Matheus Albergaria de Magalhães A Behavioral Model of Rational Choice (Simon 1955)
  13. 13. Motivation Argument Conclusions References CONCLUSIONS Main goal of the paper: to construct definitions of rational choice which were modeled more closely upon actual decision processes by organisms. Broader goal: provide some material for the construction of a theory of the behavior of a human individual or of groups of individuals who are making decisions in an organizational context. Matheus Albergaria de Magalhães A Behavioral Model of Rational Choice (Simon 1955)
  14. 14. Motivation Argument Conclusions References CONCLUSIONS Impressions: Further attempts to refine the hypothesis and related concepts (Simon 1976). Bounded rationality seemed to have a major impact on Institutional Economics (North 1990) and other social sciences (Jones 1999).. ..but its adoption among mainstream economists was still limited (Simon 1978). Challenge: integrate this rationality concept in standard models of firm and organizational behavior. Matheus Albergaria de Magalhães A Behavioral Model of Rational Choice (Simon 1955)
  15. 15. Motivation Argument Conclusions References REFERENCES JONES, B.D. (1999). Bounded rationality. Annual Review of Political Science, 2, 297-321. NORTH, D. (1990). Institutions, institutional change and economic performance. Cambridge: Cambridge University, 3-35. SIMON, H.A. (1955). A behavioral model of rational choice. Quarterly Journal of Economics, 49, 99-118. SIMON, H.A. (1976). From substantive to procedural rationality. In S.J. Latsis (Ed.), Method and Appraisal in Economics (pp.129-148). Cambridge: Cambridge University. SIMON, H.A. (1978). Rational decision-making in business organizations. Nobel Prize Lecture. Matheus Albergaria de Magalhães A Behavioral Model of Rational Choice (Simon 1955)
  16. 16. Motivation Argument Conclusions References Thank You Matheus Albergaria de Magalhães matheus.albergaria.magalhaes@gmail.com http://www.sites.google.com/site/malbergariademagalhaes Matheus Albergaria de Magalhães A Behavioral Model of Rational Choice (Simon 1955)

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