Rationality

From DDL Wiki

In the study of decision-making, rationality is a characteristic of a decision-making process. There are different types of rationality that correspond to the following definition (Stirling, 2003): A rational decision is one that conforms either to a set of general principles that govern preferences or to a set of rules that govern behavior.

Substantive rationality is the paradigm that guides formal decision analysis. It deals with principles about preferences. First, for all of the possible options, the decision-maker has a total ordering over them. Second, the decision-maker should choose the option that is most preferred.

Procedural rationality deals with decision-making processes. Procedural rationality implies that a decision-maker uses specific rules or procedures to make a choice. This is context specific, because the rules or procedures that make sense in one domain may be poor choices in another.

Bounded rationality starts with the observation that information and computational power (be it computers or people) are limited in the real-world, and this prevents complete optimization. In this paradigm, satisficing is seen as an appropriate strategy. Many of the choice strategies reflect this paradigm.

Intrinsic rationality looks at each alternative by itself and considers whether the expected benefits of the alternative exceed the expected losses. If the alternative is a net gain, then keep it, else discard it. Intrinsic rationality allows a decision-maker to create a set of (intrinsically) rational solutions (instead of just one optimal or satisfactory solution).

References

Stirling, Wynn C., Satisficing Games and Decision Making, Cambridge University Press, Cambridge, 2003.