=09

Satisficing

=09

From Wikipedia, the free encycl= opedia

=09

Satisficing is a decision-making strategy or cognitive heuristic that entails searching through the available alt= ernatives until an acceptability threshold is met, without necessarily maximizing any= specific objective.^[1] The te= rm satisficing, a portm= anteau of satisfy and suffice,[2] was introduced by Herbert A. Simon in 1956,^[3]^=
[4] although the concept was first posited in his 1947 book Administ= rative Behavior.^[5]^[6=
] Simon used satisficing to explain the behavior of= decision makers under circumstances in which an optimal solution cannot be= determined. He maintained that many natural problems are characterized by = computational intractability or a lack of information, both= of which preclude the use of mathematical optimization procedures. He obse= rved in his Nobel Prize in Economics speech that "dec= ision makers can satisfice either by finding optimum solutions for a simpli= fied world, or by finding satisfactory solutions for a more realistic world= . Neither approach, in general, dominates the other, and both have continue= d to co-exist in the world of management= science".^[7]

Simon formulated the concept within a novel approach to rati= onality, which posits that rational choice theory is an unrealistic d= escription of human decision processes and calls for psychological realism.= He referred to this approach as bounded rationality. Moral satisficing is a b= ranch of bounded rationality that views moral behavior as based on pragmati= c social heuristics rather than on moral rules or optimization principles. = These heuristics are neither good nor bad per se, but only in relation to t= he environments in which they are used.^=
[8] Some consequential= ist theories in moral philosophy use the concept of satisficing in a similar = sense, though most call for optimization instead.

In decision-making research=

= [edit]<= /span>

Two traditions of satisficing exist in decision-making resea= rch: Simon's program of studying how individuals or institutions rely on he= uristic solutions in the real world, and the program of finding optimal sol= utions to problems simplified by convenient mathematical assumptions (so th= at optimization is possible).^[9]

Heuristic Satisficing

[edit]

Heuristic satisficing refers to the use of aspiration levels= when choosing from different paths of action. By this account, decision-ma= kers select the first option that meets a given need or select the option t= hat seems to address most needs rather than the "optimal" solution. The bas= ic model of aspiration-level adaptation is as follows: ^[10]

Step 1: Set an aspiration level =CE=B1.

Step 2: Choose the first option that meets or exceeds =CE=B1= .

Step 3: If no option has satisfied =CE=B1 after time =CE=B2, then change = =CE=B1 by an amount =CE=B3 and continue until a satisfying option is f= ound.

Example: Consider pricing c= ommodities. An analysis of 628 used car dealers showed that 97% relied on a= form of satisficing.^[=
11]= Most set the initial price =CE=B1 in the middle of the price range of comp= arable cars and lowered the price if the car was not sold after 24 days (= =CE=B2) by about 3% (=CE=B3). A minority (19%), mostly smaller dealerships,= set a low initial price and kept it unchanged (no Step 3). The car dealers= adapted the parameters to their business environment. For instance, they d= ecreased the waiting time =CE=B2 by about 3% for each additional competitor= in the area.

Note that aspiration-level ada= ptation is a process model of actual behavior rather than an as-if optimiza= tion model, and accordingly requires an analysis of how people actually mak= e decisions. It allows for predicting surprising effects such as the "cheap= twin paradox", where two similar cars have substantially different price t= ags in the same dealership.[4] The reason is that one car entered the deale= rship earlier and had at least one change in price at the time the second c= ar arrived.

Example: A task is to sew a patch onto a pa= ir of blue pants. The best needle to do the threading is a 4-cm-long needle= with a 3-millimeter eye. This needle is hidden in a haystack along with 1,= 000 other needles varying in size from 1 cm to 6 cm. Satisficing claims tha= t the first needle that can sew on the patch is the one that should be used= . Spending time searching for that one specific needle in the haystack is a= waste of energy and resources.

A crucial determinant of a satisficing decision strategy con= cerns the construction of the aspiration level. In many circumstances, the = individual may be uncertain about the aspiration level.

Example: An individual who only seeks a sat= isfactory retirement income may not know what level of wealth is required= =E2=80=94given uncertainty about future prices=E2=80=94to ensure a satisfac= tory income. In this case, the individual can only evaluate outcomes on the= basis of their probability of being satisfactory. If the individual choose= s that outcome which has the maximum chance of being satisfactory, then thi= s individual's behavior is theoretically indistinguishable from that of an = optimizing individual under certain conditions.^[12]^{[13]^[14]}

Another key issue concerns an evaluation of satisficing stra= tegies. Although often regarded as an inferior decision strategy, specific = satisficing strategies for inference have = been shown to be eco= logically rational, that is in particular decision environments, they c= an outperform alternative decision strategies.^[15]

Satisficing also occurs in consensus building when the group= looks towards a solution everyone can agree on even if it may not be the b= est.

Example: A group spends hours projecting th= e next fiscal year's budget. After hours of debating they eventually reach = a consensus, only to have one person speak up and ask if the projections ar= e correct. When the group becomes upset at the question, it is not because = this person is wrong to ask, but rather because the group has already come = up with a solution that works. The projection may not be what will actually= come, but the majority agrees on one number and thus the projection is goo= d enough to close the book on the budget.

Optimization

[edit]

One popular method for rationalizing satisficing is optimization whe= n all costs, including the cost of the optimization calc= ulations themselves and the cost of getting information for use in those ca= lculations, are considered. As a result, the eventual choice is usually sub= -optimal in regard to the main goal of the optimization, i.e., different fr= om the optimum in the case that the costs of choosing are not taken into ac= count.

As a form of optimization

[edit<= span class=3D"mw-editsection-bracket">]

Alternatively, satisficing can be considered to be just constraint satisfactio= n, the process of finding a solution satisfying a set of constraints, w= ithout concern for finding an optimum. Any such satisficing problem can be = formulated as an (equivalent) optimization problem using the indicator function of the satisficing = requirements as an objective function. More formally, if X denotes the set of all options a= nd $S =E2=8A=86 X$ denotes the set of "satisficing" options, then selecting a sati= sficing solution (an element of $= S$ ) is equivalent to the following optimization problem

where $I s$ denotes the Indic= ator function of $S$ , that is

A solution $s =E2= =88=88 X$ to this optimization problem is optimal i= f, and only if, it is a satisficing option (an element of S). Thus, from a decision theor= y point of view, the distinction between "optimizing" and "satisficing" is = essentially a stylistic issue (that can nevertheless be very important in c= ertain applications) rather than a substantive issue. What is important to = determine is what should be optimized and what should be satisficed. = The following quote from Jan Odhnoff's 1965 paper is appropriate:^[16]

In my = opinion there is room for both 'optimizing' and 'satisficing' models in bus= iness economics. Unfortunately, the difference between 'optimizing' and 'sa= tisficing' is often referred to as a difference in the quality of a certain= choice. It is a triviality that an optimal result in an optimization can b= e an unsatisfactory result in a satisficing model. The best things would th= erefore be to avoid a general use of these two words.

Applied to the utility framework[<= /span>edit]

In economics, satisficing i= s a behavior which attempts to achieve at le= ast some minimum level o= f a particular varia= ble, but which does not necessarily maximize its value.^[17] The most common application of the co= ncept in economics is in the behavioral theory of the firm, which, unlike traditional accounts, pos= tulates that producers treat profit not as a goal to be maximized, but as a constraint. Under these= theories, a critical level of profit must be achieved by firms; thereafter= , priority is attached to the attainment of other goals.

More formally, as before if $X$ denotes the set of all options $s$ , and we have the payoff= function $U (s)$ which gives the = payoff enjoyed by the agent for each option. Suppose we define the optimum = payoff $<= var>U *$ the solution to

with the optimum actions being the set $O$ of options suc= h that $U(s *) =3D U *$ (i.e. it is th= e set of all options that yield the maximum payoff). Assume that the set $O$ = has at least one element.

The idea of the aspiration level was introduc= ed by Herbert A. Simon and d= eveloped in economics by Richard Cyert and James March in their 1963 book <= i id=3D"mwqQ">A Behavioral Theory of the Firm.^[18] The aspiration level is the payoff that th= e agent aspires to: if the agent achieves at least this level it is satisfi= ed, and if it does not achieve it, the agent is not satisfied. Let us defin= e the aspiration level $A$ and assume that $A =E2=89=A4 U *$ . Clearly, whilst= it is possible that someone can aspire to something that is better than th= e optimum, it is in a sense irrational to do so. So, we require the aspirat= ion level to be at or below the optimum payoff.

We can then define the set of satisficing options $S$ as = all those options that yield at least $A$ : $s =E2=88=88 S$ if and only if<= /em> $A =E2=89=A4 U (= s)$ . Clearly since $A =E2= =89=A4 U *$ , it follows that O =E2=8A=86 S. That is, the set of optimum actions is a subse= t of the set of satisficing options. So, when an agent satisfices, then she= will choose from a larger set of actions than the agent who optimizes. One= way of looking at this is that the satisficing agent is not putting in the= effort to get to the precise optimum or is unable to exclude actions that = are below the optimum but still above aspiration.

An equivalent way of looking at satisficing is epsilon-optimization (that means you choose your actions so that the = payoff is within epsilon of the optimum). If we define the "gap" between th= e optimum and the aspiration as $=CE=B5$ where $= =CE=B5 =3D U * =E2=88=92= A$ . Then the set of satisficing options $S (=CE=B5)$ can be defined as all those opti= ons $s <= /span>$ such that $U (s) =E2=89=A5 U * =E2=88=92 =CE=B5$ .

Other applications in economics

= [edit]

Apart from the behavioral theory of the firm, applications o= f the idea of satisficing behavior in economics include the Akerlof and Yel= len model of menu cost, popular in New Keynesian macroeconomics.^[19]^{[20] Also, in economics and game theory=
there is the notion of an Epsilon-equilibrium, which is a generalization of the standard Nash equilibrium in which each pla=
yer is within $=CE=B5$ of his or her optimal payoff (the s=
tandard Nash-equilibrium being the special case where $=CE=B5 =3D 0$ ).^[21]}

Endogenous aspiration levels[edit]

What determines the aspiration level may be derived from pas= t experience (some function of an agent's or firm's previous payoffs), or s= ome organizational or market institutions. For example, if we think of mana= gerial firms, the managers will be expected to earn normal profits by their sharehold= ers. Other institutions may have specific targets imposed externally (for e= xample state-funded universities in the UK have targets for student recruit= ment).

An economic example is the Dixo= n model of an economy consisting of many firms operating in different i= ndustries, where each industry is a duopoly.[22] The endogenous as= piration level is the average profit in the economy. This represents the po= wer of the financial markets: in the long-run firms need to earn normal pro= fits or they die (as Armen Alchian= once said, "This is the criterion by which the economic system selects sur= vivors: those who realize positive profits are the survivors; those who suf= fer losses disappear"^{[23]). We can then think what happens over time. If firms are earning profit=
s at or above their aspiration level, then they just stay doing what they a=
re doing (unlike the optimizing firm which would always strive to earn the =
highest profits possible). However, if the firms are earning below aspirati=
on, then they try something else, until they get into a situation where the=
y attain their aspiration level. It can be shown that in this economy, sati=
sficing leads to collusion amongst firms: =
competition between firms leads to lower profits for one or both of the fir=
ms in a duopoly. This means that competition is unstable: one or both of th=
e firms will fail to achieve their aspirations and hence try something else=
. The only situation which is stable is one where all firms achieve their a=
spirations, which can only happen when all firms earn average profits. In g=
eneral, this will only happen if all firms earn the joint-profit maximizing=
or collusive profit.^[24]}

In personality= and happiness research

[edit]

M= ain article: Maximization = (psychology)

Some research has suggested that satisficing/maximizing and other decision-mak= ing strategies, like personality trait= s, have a strong genetic component and endure over time. This genetic influ= ence on decision-making behaviors has been found through classical twin studies, in wh= ich decision-making tendencies are self-reported by each member of a twinne= d pair and then compared between monozygotic and dizygotic twins.^[25] This implies that people can b= e categorized into "maximizers" and "satisficers", with some people landing= in between.

The distinction between satisficing and maximizing not only = differs in the decision-making process, but also in the post-decision evalu= ation. Maximizers tend to use a more exhaustive approach to their decision-= making process: they seek and evaluate more options than satisficers do to = achieve greater satisfaction. However, whereas satisficers tend to be relat= ively pleased with their decisions, maximizers tend to be less happy with t= heir decision outcomes. This is thought to be due to limited cognitive reso= urces people have when their options are vas= t, forcing maximizers to not make an optimal choice. Because maximizati= on is unrealistic and usually impossible in everyday life, maximizers often= feel regretful in their post-choice evaluation.^[26]

In survey methodology

[edit]

As an example of satisficing, in the field of social cognition, Jon Krosnick proposed a theory of statistical survey satis= ficing which says that optimal question answering by a survey respondent in= volves a great deal of = cognitive work and that some people would use satisficing to reduce tha= t burden.^[27]<= sup about=3D"#mwt124" class=3D"mw-ref reference" id=3D"cite_ref-Krosnick199= 9_28-0" rel=3D"dc:references" typeof=3D"mw:Extension/ref" data-mw=3D"{"= ;name":"ref","attrs":{"name":"Krosn= ick1999"},"body":{"id":"mw-reference-text-cit= e_note-Krosnick1999-28"}}">[28] Some people may shortcut their cognitive processes in two ways:

Weak satisficing: Respondent executes all= cognitive steps involved in optimizing, but less completely and with bias.

Strong satisficing: Respondent offers responses that will = seem reasonable to the interviewer without any memory search or information= integration.

Likelihood to satisfice is linked to respondent ability, re= spondent motivation and task difficulty= .

Regarding survey answers, satisficing manifests in:

choosing explicitly offered no-opinion or= 'don't know' response option

choosing socially desirable responses

non-differentiation or straight-lining when a battery of q= uestions asks for ratings of multiple objects on the same response scale
acquiescence response bias, which is the tendency to agree= with any assertion, regardless of its content

selecting the first reasonable looking option

randomly selecting a response

skipping items

abandoning the survey or terminating the survey early

rushing on online surveys

choosing minimally acceptable answers when verbal answers = are required

See= also

[= edit]=

Alpha=E2=80=93be= ta pruning

Decision theory

Flipism

Frame problem

Homo economicus

Optimal stopping

Optimism bias

Overchoice

Perfect is the e= nemy of good

Portmanteau

Principle of good enough=

Rational ignorance

Rationality

Satisfaction paradox

Satisfiability

Utility maximiza= tion problem

References

[edit]

=E2=86=91 Colm= an, Andrew (2006). A Dictionary of Psychology. New Y= ork: Oxford University Press. p.&nb= sp;6= 70. ISBN 978-0-19-861035-9.

=E2=86=91 Manktelow, Ken (2000). Reasoning and Thin= king. Hove: Psychology Press. p. 221. ISBN 978-0-86377-708-0.

=E2=86=91 Simon, Herbert A. (1956). "Rational Choice and = the Structure of the Environment" (PDF). Psychological Review. 63 (2): 129=E2=80=93138. doi:10.1037/h0042769. PMID 13310708. S2CID 8503301. (page 129: "Evidently, organisms adap= t well enough to 'satisfice'; they do not, in general, 'optimize'."; page 1= 36: "A 'satisficing' path, a path that will permit satisfaction at some spe= cified level of all its needs.")

=E2=86=91 Artinger, Florian M.; Gigerenzer, Gerd; Jacobs, Perke (2022). "Satisficing: Integra= ting Two Traditions". Journal of Economic Literature. 60 (2): 598=E2= =80=93635. doi:10.1257/jel.202= 01396. hdl:21.11116/0000-000= 7-5C2A-4. ISSN = 0022-0515. S2CID 249320959.

= =E2=86=91 <= span id=3D"mw-reference-text-cite_note-Brown2004-5" class=3D"mw-reference-t= ext reference-text">Brown, Reva (2004). "Conside= ration of the Origin of Herbert Simon's Theory of 'Satisficing' (1933-1947)= ". Management Decision. 42 (10): 1240=E2=80=931256. doi:10.1108/00251740410568944.

=E2=86=91 S= imon, Herbert A. (1947). Administrative Behavior: a Study of Decision-Ma= king Processes in Administrative Organization (1st ed.). New York: Macmillan. OCLC 356505.

=E2=86=91 Simon, Herbert A. (1979). "Rational = decision making in business organizations". The American Ec= onomic Review. 69 (4): 493=E2=80=93513. JSTOR 1808698.

=E2=86=91 Gigerenzer, Gerd (2011-04-15), = "= Moral Satisficing: Rethinking Moral Behavior as Bounded Rationality", <= i id=3D"mwAY8">Heuristics, Oxford University Press, pp. 20= 3=E2=80=93221, ret= rieved 2024-09-13<= span title=3D"ctx_ver=3DZ39.88-2004&rft_val_fmt=3Dinfo%3Aofi%2Ffmt%3Ake= v%3Amtx%3Ajournal&rft.genre=3Darticle&rft.jtitle=3DHeuristics&r= ft.atitle=3DMoral+Satisficing%3A+Rethinking+Moral+Behavior+as+Bounded+Ratio= nality&rft.pages=3D203-221&rft.date=3D2011-04-15&rft.aulast=3DG= igerenzer&rft.aufirst=3DGerd&rft_id=3Dhttp%3A%2F%2Fdx.doi.org%2F10.= 1093%2Facprof%3Aoso%2F9780199744282.003.0009&rfr_id=3Dinfo%3Asid%2Fen.w= ikipedia.org%3ASatisficing" class=3D"Z3988" about=3D"#mwt23" id=3D"mwAZQ"><= /span>

=E2=86=91 Artinger, Florian M.; Gigerenzer, Gerd; Jacob= s, Perke (2022-06-01). "Satisficing: Integrating Two Traditions". Journal of Economic Literature. 60 (2): 598=E2=80=93635. doi:10.1257/jel.20201396. hdl:21.11116/0000-0007-5C2A-4. ISSN 0022-0515.

=E2=86=91 = Reb, Jochen; Luan, Shenghua; Gigerenzer, Gerd (2024-05-14). Smart Ma= nagement. The MIT Press. ISBN&= nbsp;978-0-262-37857-4.

=E2=86=91 Artinger, Florian M; Gigerenzer, Gerd (2024-0= 7-23). "How heuristic pricing shapes the aggregate market: the "Cheap T= win Paradox"". Industrial and Corporate Change. doi:10.1093/icc/dtae025. hdl:21.11116/0000-000F-59F2-C. ISSN 0960-6491.

=E2=86=91 C= astagnoli, E.; LiCalzi, M. (1996). "Expected Utility witho= ut Utility" (PDF). Theory and Decision. 41 (3): 281=E2=80=93301. doi:10.1007/BF00136129. hdl:10278/4= 143. S2CID 154464803.

=E2=86=91 Bordley, R.; LiCalzi, = M. (2000). "Decision Analysis Using Targets Instead of Utility Functions". = Decisions in Economics & Finance. 2= 3 (1): 53=E2=80=9374. doi:10.1007/s102030050005. hdl:10278/3610. S2CID 11162758.

=E2=86=91 Bordley, R.; Kirkwood, C. (2004). "Preference Analysis= with Multiattribute Performance Targets". Operations Resea= rch. 52 (6): 82= 3=E2=80=93835. doi:10.1287/opr= e.1030.0093.

=E2=86=91 Gigerenzer, Gerd; Goldstein, Daniel G. (October 1996). "Reas= oning the fast and frugal way: Models of bounded rationality". Psychological Review. 103 (4): 650=E2=80=93669. doi:10.1037/0033-295x.103.4.650. hdl:21.11116/0000-0000-B771-2. PMID 8888650.

=E2=86=91 Odhnoff, Jan (1965). "On the Techniques of Optim= izing and Satisficing". The Swedish Journal of Economics. 67 (1): 24=E2=80= =9339. doi:10.2307/3439096. JSTOR<= span typeof=3D"mw:Entity" id=3D"mwAgo"> 3439096.

=E2=86=91 Dixon, Huw (2= 001). "Artificial Intel= ligence and Economic Theory" (P= DF). Surfing Economics: Essays for the Inquiring Eco= nomist. New York: Palgrave. ISBN&n= bsp;978-0-333-76061-1.=

=E2=86=91 Cyert, Richard; March, James G. (1992). = A Behavioral Theory of the Firm (2nd ed.). Wiley-Blackwell. ISBN 978-0-631-17451-6.

=E2=86=91 Akerlof, George A.= ; Yellen, Janet L. (1985). "Can Small Deviations from Rationality Make Sign= ificant Differences to Economic Equilibria?". American Economic Review= . 75 (4): 708= =E2=80=93720. JSTOR 1821349.

=E2=86=91 Akerlof, George A.; Yellen, Janet L. (1985). "A Near-ration= al Model of the Business Cycle, with Wage and Price Inertia". The Quarterly Journal of Economics. 100= (5): 823=E2=80=93838. doi:10.1093/qje/100.Supplement.823.

=E2=86=91 Dixon, H. (1987). "Approximate= Bertrand Equilibria in a replicated Industry". = Review of Economic Studies. 54 (1): = 47=E2=80=9362. doi:10.2307/2297445. JSTOR 2297445.

=E2=86=91 Dixon, H. (2000). "Keeping Up with the Joneses: C= ompetition and the Evolution of Collusion". Journal of Economic Behavior and Organization. 43 (2): 223=E2=80=93= 238. doi<= /a>:10.1016/S0167-268= 1(00)00117-7.

=E2=86=91 <= cite id=3D"CITEREFAlchian1950" class=3D"citation journal cs1" about=3D"#mwt= 107">Alchian, A. (1950). "Uncertainty, Evolution and Economic Theory". Journal of Political Economy. 58 (3): 211=E2=80=93222. doi:10.1086/256940. JSTOR 1827159. S2CID 36045710.

=E2=86=91 Dixon (2000), Theore= m 1 page 228. for a non-technical explanation see Chapter 8, Surfing Economics by Dixon H

=E2=86=91 Simonson, I.; Sela, A. (2011). "On the heritability of consumer dec= ision making: An exploratory approach for studying genetic effects on judgm= ent and choice". Journal of Consumer Research. 37 (6): 951=E2=80=93= 966. doi<= /a>:10.1086/657022.<= /span>

=E2=86=91 Schwartz, B.; Ward, A.; Monterosso, J.; Lyubomirsk= y, S.; White, K.; Lehman, D. R. (2002). "Maximizing versus satisficing: Happiness is a matter = of choice" (PDF). Journal of Personality and Social Psychology. 83 (5): 1178=E2=80=931197.= doi:= 10.1037/0022-3514.83.5.1178= . P= MID 12416921. Archived from the ori= ginal (PDF) on 2023-12-2= 2. Retrieved 2017-12-05.=

=E2=86=91 Krosnick, Jon = A. (1991). "Response strategies for coping with the cognitive demands of at= titude measures in surveys". Applied Cognitive Psychology. 5 (3): 213=E2= =80=93236. doi:10.1002/acp.2= 350050305. ISSN 0888-4080.

=E2=86=91 Krosnick, Jon A. (1999). = "Survey research". Annual Review of Psychology. 50 (1): 537=E2=80=93567. d= oi:10.1146/annurev.p= sych.50.1.537. ISSN 0066-4308. PMID 15012463.

External links

[edit]

Web Dictionary of Cybernetics and Systems defini= tion of "satisficing"

A web page dedi= cated to a discussion on the "satisficing" vs "optimizing" debate.

Schwartz's Tech Talk ("The= Paradox of Choice =E2=80=93 Why More Is Less") given at Google on April 27= , 2006

v
t
e
Institutional economics

v
t<= /abbr>
e
Decision theory<= /div>

Retrieved from "https://en.wikipedia.org/w/index.php?title=3DSatisficing&a= mp;oldid=3D1377167154"

Categories: <= ul>
Rational choice theory<= /li>
Heuristics
Organizational behavior
Decision theory
Hidden categories:
Articles with shor= t description
Short description is different from Wik= idata

Please make it =E2=82=AC0 yearly!

Satisficing

In decision-making research=

Heuristic Satisficing

Optimization

As a form of optimization

Other applications in economics

Endogenous aspiration levels[edit]

In personality= and happiness research

In survey methodology

See= also

References

Further reading

External links