Bounded Rationality in Newsvendor Models

Validating Models for Bounded Rationality and Decision Biases in a Newsvendor Experiment

A number of experimental newsvendor studies have shown that human subjects make decisions which coincide with a “pull-to-center” effect. In general, three behavioral theories have been proposed in the literature to explain this behavior: bounded rationality, mean anchoring, and minimizing ex post inventory regret. Unfortunately, these models generate similar predictions under symmetric demand d...

Bounded Rationality and Exemplar Models

Bounded Rationality

The notion of bounded rationality has recently gained considerable popularity in the behavioural and social sciences. This article surveys the different usages of the term, in particular the way ‘anomalous’ behavioural phenomena are elicited, how these phenomena are incorporated in model building, and what sort of new theories of behaviour have been developed to account for bounded rationality ...

Bounded Rationality

BOUNDED RATIONALITY: rationality as exhibited by decision makers of limited abilities. The ideal of RATIONAL DECISION MAKING formalized in RATIONAL CHOICE THEORY, UTILITY THEORY, and the FOUNDATIONS OF PROBABILITY requires choosing so as to maximize a measure of expected utility that reflects a complete and consistent preference order and probability measure over all possible contingencies. Thi...

Bounded Rationality

Findings from behavioral organization theory, behavioral decision theory, survey research, and experimental economics leave no doubt about the failure of rational choice as a descriptive model of human behavior. But this does not mean that people and their politics are irrational. Bounded rationality asserts that decision makers are intendedly rational; that is, they are goaloriented and adapti...