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.

Abstract

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.

• Item Type: MPRA Paper
• Language: English
• Keywords: bounded rationality; rational choice; behavioral economics; behavioral finance;risk aversion
• Subjects: B - History of Economic Thought, Methodology, and Heterodox Approaches > B5 - Current Heterodox Approaches > B52 - Institutional ; Evolutionary; C - Mathematical and Quantitative Methods > C6 - Mathematical Methods ; Programming Models ; Mathematical and Simulation Modeling > C60 - General; D - Microeconomics > D8 - Information, Knowledge, and Uncertainty > D81 - Criteria for Decision-Making under Risk and Uncertainty; D - Microeconomics > D8 - Information, Knowledge, and Uncertainty > D83 - Search ; Learning ; Information and Knowledge ; Communication ; Belief ; Unawareness

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