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Bounded Rationality in Decision Making Under Uncertainty: Towards Optimal Granularity

  • Joe Lorkowski
  • Vladik Kreinovich

Part of the Studies in Systems, Decision and Control book series (SSDC, volume 99)

Table of contents

  1. Front Matter
    Pages i-ix
  2. Joe Lorkowski, Vladik Kreinovich
    Pages 25-67
  3. Joe Lorkowski, Vladik Kreinovich
    Pages 135-136
  4. Back Matter
    Pages 137-164

About this book

Introduction

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.

Keywords

Limited Rationality Observed Decision Making Optimization of Granularity Human Decision Making Seemingly Irrational Behavior

Authors and affiliations

  • Joe Lorkowski
    • 1
  • Vladik Kreinovich
    • 2
  1. 1.Department of Computer Science, College of EngineeringUniversity of Texas at El PasoEl PasoUSA
  2. 2.Department of Computer Science, College of EngineeringUniversity of Texas at El PasoEl PasoUSA

Bibliographic information

  • DOI https://doi.org/10.1007/978-3-319-62214-9
  • Copyright Information Springer International Publishing AG 2018
  • Publisher Name Springer, Cham
  • eBook Packages Engineering
  • Print ISBN 978-3-319-62213-2
  • Online ISBN 978-3-319-62214-9
  • Series Print ISSN 2198-4182
  • Series Online ISSN 2198-4190
  • Buy this book on publisher's site
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