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Bounded rationality: Bounded rationality is a concept suggesting that decision-making is limited by cognitive abilities, information, and time constraints. It acknowledges that individuals make choices based on available information, heuristics, and simplified models rather than exhaustive analysis, leading to satisficing outcomes rather than always optimizing decisions in complex situations. See also Decisions, Decision theory, Rationality.
Annotation: The above characterizations of concepts are neither definitions nor exhausting presentations of problems related to them. Instead, they are intended to give a short introduction to the contributions below. – Lexicon of Arguments.

Author Concept Summary/Quotes Sources

Christine M. Jolls on Bounded Rationality - Dictionary of Arguments

Parisi I 60
Bounded rationality/Jolls: Many important questions in behavioral law and economics today turn on competing conceptions of bounded rationality. Cf. >Bounded rationality/Simon
Economic analysis: Normative analysis of legal policy tends to be more complex when nonoptimizing decision rules are added to Simon’s original model of nonomniscience. For instance, a legal rule such as New York City’s now-defunct “soda law,” which restricted the sale of sugary drinks in servings above sixteen ounces, might have been an attempt to address the reflexive ordering of supersized sugary drinks simply because they (say) offered reasonable “bang for the buck” on a per-ounce basis—but from a normative standpoint it is difficult to be certain that such reflexive purchasing is truly a “failing” in need of legal “correction.”
Nonomniscience: A simple error in judgment about the caloric content of supersized sugary drinks, by contrast, is amenable both to empirical confirmation - do people entering an eating establishment know approximately how many calories a supersized sugary drink has? - and to legal responses designed simply to reduce the degree of nonomniscience (though of course the costs of any such response must also be considered). For purposes both of analytic clarity and of normative debate, distinguishing between the nonomniscience and nonoptimization aspects of Simon’s bounded rationality is tremendously valuable (...).*
Parisi I 62
Nonoptimization: “Nonoptimization” (...) will refer to decision-making that is not in accordance with the optimizing behavior postulated by expected utility theory.
„Satisficing“/Herbert Simon/example: As an (...) illustration of the Simonian notion of an individual “satisficing” rather than choosing the option that is “optimal,” imagine an individual assessing whether a price offered for property (...) is at or above a level considered to be “acceptable.” The individual, Simon writes, “may regard $15,000 as an ‘acceptable’ price, anything over this amount as ‘satisfactory,’ anything less as ‘unsatisfactory’ ” and, accordingly, may accept the first offer received at or above $15,000 regardless of whether such acceptance is “optimal” (Simon, 1955(4), p. 104). >Optimism/Bibas, >Loss aversion/Bibas, >Plea bargain/Bibas, >Non-omniscience/Jolls, >Availability heuristic/Economic theories, >Risk perception/Economic theories.

*Behavioral Economics: Behavioral economics focuses on bounded willpower and bounded self-
interest alongside bounded rationality (Thaler, 1996(1). Bounded rationality has been particularly prominent within behavioral law and economics, however (...). For description of behavioral law and economics work on bounded willpower and bounded self-interest, see Jolls (2007(2), 2011(3)). >Bounded rationality/Simon, >Bounded rationality/economic theories.

1. Thaler, Richard H. (1996). “Doing Economics Without Homo Economicus,” in Steven G. Medema and Warren J. Samuels, eds., Foundations of Research in Economics: How Do Economists Do Economics?, 227–237. Cheltenham: Edward Elgar Publishing.
2. Jolls, Christine (2007). “Behavioral Law and Economics,” available at (previously published in Peter Diamond and Hannu Vartiainen, eds., Behavioral Economics and Its Applications. Princeton, NJ: Princeton University Press).
3. Jolls, Christine (2011). Behavioral Economics and the Law. Boston, MA and Delft: now Publishers.
4. Simon, Herbert A. (1955). “A Behavioral Model of Rational Choice.” Quarterly Journal of Economics 69: 99–118.

Jolls, Christine, „Bounded Rationality, Behavioral Economics, and the Law“. In: Parisi, Francesco (ed) (2017). The Oxford Handbook of Law and Economics. Vol 1: Methodology and Concepts. NY: Oxford University Press.

Explanation of symbols: Roman numerals indicate the source, arabic numerals indicate the page number. The corresponding books are indicated on the right hand side. ((s)…): Comment by the sender of the contribution. Translations: Dictionary of Arguments
The note [Concept/Author], [Author1]Vs[Author2] or [Author]Vs[term] resp. "problem:"/"solution:", "old:"/"new:" and "thesis:" is an addition from the Dictionary of Arguments. If a German edition is specified, the page numbers refer to this edition.
Jolls, Christine M.
Parisi I
Francesco Parisi (Ed)
The Oxford Handbook of Law and Economics: Volume 1: Methodology and Concepts New York 2017

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