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Bounded Rationality: Models of Fast and Frugal Inference

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  • Gerd Gigerenzer

Abstract

I specify general criteria for models of bounded rationality and discuss specific models for satisficing inference. The task of these fast and frugal algorithms is to infer unknown features of their environment under the constraints of limited knowledge, limited time, and limited computational capacities. These algorithms violate fundamental tenets of classical rationality: They neither look up nor integrate all information. I review the performance of the satisficing "Take The Best" algorithm. Despite its frugality, Take The Best can make as many correct inferences as computationally expensive weighted linear models that use and combine all available information. Accurate inferences need not follow the dictates of classical rationality.

Suggested Citation

  • Gerd Gigerenzer, 1997. "Bounded Rationality: Models of Fast and Frugal Inference," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), vol. 133(II), pages 201-218, June.
    • Handle: RePEc:ses:arsjes:1997-ii-7
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    References listed on IDEAS

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    2. Charness, Gary B & Levin, Dan & Karni, Edi, 2008. "On the Conjunction Fallacy in Probability Judgment: New Experimental Evidence," University of California at Santa Barbara, Economics Working Paper Series qt2dn4t727, Department of Economics, UC Santa Barbara.
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    4. Charness, Gary & Karni, Edi & Levin, Dan, 2010. "On the conjunction fallacy in probability judgment: New experimental evidence regarding Linda," Games and Economic Behavior, Elsevier, vol. 68(2), pages 551-556, March.
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    8. Tommaso Ciarli & Andre' Lorentz & Maria Savona & Marco Valente, 2012. "The role of technology, organisation, and demand in growth and income distribution," LEM Papers Series 2012/06, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy.

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