Bounded Rationality in Decision Making Under Uncertainty: Towards Optimal Granularity
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Beschreibung
This book addresses an intriguing question: are our decisions rational? It explains seemingly irrational human decision-making behavior by taking into account our limited ability to process information. It also shows with several examples that optimization under granularity restriction leads to observed human decision-making. Drawing on the Nobel-prize-winning studies by Kahneman and Tversky, researchers have found many examples of seemingly irrational decisions: e.g., we overestimate the probability of rare events.
Our explanation is that since human abilities to process information are limited, we operate not with the exact values of relevant quantities, but with “granules” that contain these values. We show that optimization under such granularity indeed leads to observed human behavior. In particular, for the first time, we explain the mysterious empirical dependence of betting odds on actual probabilities.
This book can be recommended to all students interestedin human decision-making, to researchers whose work involves human decisions, and to practitioners who design and employ systems involving human decision-making —so that they can better utilize our ability to make decisions under uncertainty.
This book addresses an intriguing question: are our decisions rational? It explains seemingly irrational human decision-making behavior by taking into account our limited ability to process information. It also shows with several examples that optimization under granularity restriction leads to observed human decision-making. Drawing on the Nobel-prize-winning studies by Kahneman and Tversky, researchers have found many examples of seemingly irrational decisions: e.g., we overestimate the probability of rare events.
Our explanation is that since human abilities to process information are limited, we operate not with the exact values of relevant quantities, but with “granules” that contain these values. We show that optimization under such granularity indeed leads to observed human behavior. In particular, for the first time, we explain the mysterious empirical dependence of betting odds on actual probabilities.
This book can be recommended to all students interested in human decision-making, to researchers whose work involves human decisions, and to practitioners who design and employ systems involving human decision-making —so that they can better utilize our ability to make decisions under uncertainty.
Explains seemingly irrational human decision-making by taking into account our limited ability to process information Shows with several examples that optimization under granularity restriction leads to observed human decision-making Demonstrates that granularity helps to explain seemingly irrational human decision-making Includes supplementary material: sn.pub/extras
Autor*in
Joe Lorkowski
Themen in »Bounded Rationality in Decision Making Under Uncertainty: Towards Optimal Granularity«
Limited Rationality Observed Decision Making Optimization of Granularity Human Decision Making Seemingly Irrational Behavior