Working Paper Series, Department of Industrial Economics & Strategy, Copenhagen Business School
From "Thin" to "Thick" bounded Rationality in the Economics of Prganization: An Explorative Discussion.
Abstract: Bounded rationality has often been invoked in the theory
of economic organization, mainly to rationalize contractual incompleteness.
I argue that one may distinguish between thin and thick notions of bounded
rationality; that models that rely on thin notions are often effectively
indistinguishable from models that rely on full rationality; and that the
value-added in terms of economic content by including thin bounded
rationality is usually quite small. Some recent exchanges on the
foundations of incomplete contracts are discussed in order to illuminate
these points. I then suggest that thicker notions of bounded rationality,
centering on biases and errors in human decision making and how these
interact with preferences, may help to make the theory of economic
organization behaviorally richer, and that this has substantive
implications with respect to a fuller understanding of the nature of
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