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. This requirement appears too strong to permit accurate description of the behavior of realistic individual agents studied in economics, psychology, and artificial intelligence. Since rationality notions pervade approaches to so many other issues, finding more accurate theories of bounded rationality constitutes a central problem of these fields. Prospects appear poor for finding a single “right” theory of bounded rationality due to the many different ways of weakening the ideal requirements, some formal impossibility and tradeoff theorems, and the rich variety of psychological types observable in people, each with different strengths and limitations in reasoning abilities. The textbook of Russell and Norvig [17] provides a comprehensive survey of the roles of rationality and bounded rationality notions in artificial intelligence. Cherniak