Herbert Simon was the apostle of bounded rationality. He very often illustrated bounded rationality in the context of the theory of the firm, and was, of course, a major contributor to organizational theory. However, in spite of Simon’s efforts, I argue that bounded rationality has been only incompletely absorbed in the economics of organization, is little used for substantive purposes, and mos...

In his dissertation of 1950, Nash based his concept of solution to a game on the principles that “a rational prediction should be unique, that the players should be able to deduce and make use of it.” In this paper, we address the issue of when such definitive solutions are possible. We assume player rationality at least as strong as Aumann’s rationality. By formalizing Nash’s reasoning, we sho...

A naturalized model of rationality is developed, with a focus on an important but largely neglected aspect: knowledge of error, or ‘‘negative’’ knowledge. The development of knowledge of what counts as error occurs via a kind of internal variation and selection, or quasi-evolutionary, process. Processes of reflection generate a hierarchy of principles of error, a hierarchy that frames and const...