microfoundations tell us that for individuals to respond in the manner required by simple variations of principal-agent theory assumes that decision-making on the part of humans is a rational response to external stimuli.
To the extent that complexity is making it difficult for policymakers to correctly determine how the behavior of socially dependent actors is affecting the overall behavior of corporations, the solution is not to try to impose axiomatic behavioral assumptions--e.g., that these actors are fully rational and do not face bounded rationality
or informational asymmetry constraints--but to create additional observation points that take into account both the intertemporal nature of corporations and the intricate social dependence of participants.
These costs stem from dimensions in the interorganizational network that cause transaction difficulties, including bounded rationality
, uncertainty, asset specificity, opportunism, and small numbers (Williamson, 1975).
protection and our novel, bounded rationality
justification are based on
. Annual Review of Political Science 2 (1): 297-321.
So strategy prospect value is more close to people's judgment result, reflecting bounded rationality
Meanwhile, in accordance with bounded rationality
theory, the intelligent use of heuristics can be utilized to adapt to the structure of the environment and exploit its resources in a way that favors certain behaviors.
A problem present in the book is the equal sign put between bounded rationality
and behavioral economics, a point of view that the author assumes in the text.
Rather than decision-making reflecting consistent application of knowledge, reflection and deliberation (comprising the 'reflective system'), Simon contended that insufficient knowledge, suboptimal cognitive practices and the imperative for regular hasty decisionmaking led to bounded rationality
(Velupillai and Kao 2016).
The latter is comprised of such diverse approaches as for example the concept of bounded rationality
developed by Herbert Simon, the analysis of institutional change introduced by Douglass North, the theory of market failure of George Akerlof or the inclusion of transaction costs elaborated by Oliver Williamson.
As discussed in these studies, one of the main assumptions that leads to the usage of delays is the idea of bounded rationality
. In most cases, it is hard for the firm to use real-time quality demanded by the consumers to maximize its profits, because the data collection and analysis process could take some time: by the time there is data for period t, we are in the period t + s.