Bounded Rationality Marketing
DESCRIPTION
Partial rationality in individual decision-making behavior as a result of it being bounded by the limitations of individuals in their ability to handle the complexities of information available to them as well as limitations in the availability of information to such individuals.
Partial rationality in individual decision-making behavior as a result of it being bounded by the limitations of individuals in their ability to handle the complexities of information available to them as well as limitations in the availability of information to such individuals.
KEY INSIGHTS
The concept of bounded rationality in relation to decision making suggests that individuals do not employ optimal decision-making approaches as a result of human limitations in the ability to comprehend and manage complex information as well as a result of challenges associated with limitations in information availability. Rather, the concept suggests that individuals adopt approaches that are more limited and which rely upon heuristics to ultimately make the decision-making process manageable, which includes the process of generating and evaluating alternatives for possible action.
The concept of bounded rationality in relation to decision making suggests that individuals do not employ optimal decision-making approaches as a result of human limitations in the ability to comprehend and manage complex information as well as a result of challenges associated with limitations in information availability. Rather, the concept suggests that individuals adopt approaches that are more limited and which rely upon heuristics to ultimately make the decision-making process manageable, which includes the process of generating and evaluating alternatives for possible action.
KEYWORDS Decision making, information complexity
IMPLICATIONS
The concept of bounded rationality is far-reaching and is of influence in marketing decision making as much as consumer decision making. Recognizing the sub-optimality of much marketing decision making in marketing, marketers may therefore benefit from examining more critically the decision-making processes in use by the firm with the aim of understanding better the benefits and limitations involved. Similarly, marketers must strive to understand better how and to what extent consumer decision making is also characterized by bounded rationality in decision-making processes involved in their evaluations and, potentially, adoption of the firm’s products or services.
The concept of bounded rationality is far-reaching and is of influence in marketing decision making as much as consumer decision making. Recognizing the sub-optimality of much marketing decision making in marketing, marketers may therefore benefit from examining more critically the decision-making processes in use by the firm with the aim of understanding better the benefits and limitations involved. Similarly, marketers must strive to understand better how and to what extent consumer decision making is also characterized by bounded rationality in decision-making processes involved in their evaluations and, potentially, adoption of the firm’s products or services.
APPLICATION AREAS AND FURTHER READINGS
Marketing Strategy
Taylor, Ronald N. (1976). ‘Psychological Determinants of Bounded Rationality: Implications for Decision-Making Strategies,’ Decision Sciences, 6, 409–429.
Taylor, Ronald N. (1976). ‘Psychological Determinants of Bounded Rationality: Implications for Decision-Making Strategies,’ Decision Sciences, 6, 409–429.
International Marketing
Shoham, A. (1999). ‘Bounded Rationality, Planning, Standardization of International Strategy, and Export Performance: A Structural Model Examination,’ Journal of International Marketing, 7(2), 24–50.
Shoham, A. (1999). ‘Bounded Rationality, Planning, Standardization of International Strategy, and Export Performance: A Structural Model Examination,’ Journal of International Marketing, 7(2), 24–50.
Marketing Modeling
Munier, B., Selten, R., Bouyssou, D., Bourgine, P., Day, R., Harvey, N., Hilton, D., Machina, M., Parker, P., and Sterman, J. (1999). ‘Bounded Rationality Modeling,’ Report—Marketing Science Institute Cambridge Massachusetts, 121, 21–24.
Munier, B., Selten, R., Bouyssou, D., Bourgine, P., Day, R., Harvey, N., Hilton, D., Machina, M., Parker, P., and Sterman, J. (1999). ‘Bounded Rationality Modeling,’ Report—Marketing Science Institute Cambridge Massachusetts, 121, 21–24.
Consumer Behavior
Dyner, I., and Franco, C. J. (2004). ‘Consumers’ Bounded Rationality: The Case of Competitive Energy Markets,’ Systems Research and Behavioral Science, 21(4), 373– 390.
Dyner, I., and Franco, C. J. (2004). ‘Consumers’ Bounded Rationality: The Case of Competitive Energy Markets,’ Systems Research and Behavioral Science, 21(4), 373– 390.
BIBLIOGRAPHY
Gigerenzer, G., and Goldstein, D. G. (1996). ‘Reasoning the Fast and Frugal Way: Models of Bounded Rationality,’ Psychological Review (New York), 103(4), 650–669.
Gigerenzer, G., and Goldstein, D. G. (1996). ‘Reasoning the Fast and Frugal Way: Models of Bounded Rationality,’ Psychological Review (New York), 103(4), 650–669.
Camerer, C. (1998). ‘Bounded Rationality in Individual Decision Making,’ Experimental Economics, 1(2), 163–183.
Gigerenzer, G., and Selten, R. (2002). Bounded Rationality. Cambridge, Mass.: MIT Press.
Simon, Herbert A. (1957). ‘A Behavioral Model of Rational Choice,’ in Herbert A. Simon (ed.), Models of Man: Social and Rational. New York: Wiley: 241–61.