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This 5 page paper provides an overview of bounded rationality and heuristics. The concept of bounded rationality is linked to the belief that behavioral elements influence the way in which decision-making takes place. Inherent in this concept is the understanding that human rationality has definable constraints and that uncertainty plays a major role in determining the way in which the rational mind functions. Bibliography lists 5 sources.
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5 pages (~225 words per page)
File: MH11_MHHeuri3.rtf
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that uncertainty plays a major role in determining the way in which the rational mind functions (Bounded Rationality, 2003). In understanding this concept, it is necessary to take into
account the different aspects of this concept and the way in which it relates to heuristics. The two distinct segments of the concept of bounded rationality are the
limitations of the human mind and the structures within which the human mind operates. The limitations of the human mind are based in the belief that the human mind
has limitations in terms of the tasks it can perform, the human judgment and decision making that occurs as a part of human processes, and the heuristics (the mental shortcuts)
that guide the decision-making process. As a result, the conceptual view of bounded rationality is defined by the scope of these limitations. In addition, the structures within
which the mind operates, including the environmental structures that define how information is retrieved, is shaped by heuristic factors. "Environmental structure is of crucial importance because it can explain
when and why simple heuristics perform well: if the structure of the heuristic is adapted to the environment" (Bounded Rationality, 2003). In essence, a heuristic is defined as
ecologically rational if it is adapted to the structure of the environment (Bounded Rationality, 2003). Bazerman (1998) describes some limitations of the six-step rational decision-making model, which include the
processes of defining the problem, identifying and weighing criteria, and computing the optimal decision. One of the central limitations of Bazermans perspective is the concept of bounded rationality, which
suggests that the existing limitations within the decision-making process can influence the process itself. Further, the concept of risk and the uncertainty of the environmental factors that influence decision-making
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