Munich Personal RePEc Archive

Bounded rationality:psychology, economics and the financial crises

Schilirò, Daniele (2013): Bounded rationality:psychology, economics and the financial crises. Published in: Theoretical and Practical Research in Economic Fields , Vol. 4, No. 1 (June 2013): pp. 97-108.

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This contribution focuses on the concept of bounded rationality, highlighting the role of psychology in the economic decisions. The work analyzes Simon’s approach and his notion of bounded rationality as procedural rationality. Moreover, it examines some major contributions of behavioral economics concerning cognitive biases, stressing the importance of the institutional structure in the decision process. The paper also survey the literature of behavioral finance which has become fashionable in explaining the anomalies of financial markets, pointing out also its limits.

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