Models of Bounded Rationality under Certainty

Abstract

Abstract Purpose This chapter reviews models of decision-making and choice under conditions of certainty. It allows readers to position the contribution of the other chapters in this book in the historical development of the topic area. Theory Bounded rationality is defined in terms of a strategy to simplify the decision-making process. Based on this definition, different models are reviewed. These models have assumed that individuals simplify the decision-making process by considering a subset of attributes, and/or a subset of choice alternatives and/or by disregarding small differences between attribute differences. Findings A body of empirical evidence has accumulated showing that under some circumstances the principle of bounded rationality better explains observed choices than the principle of utility maximization. Differences in predictive performance with utility-maximizing models are however small. Originality and value The chapter provides a detailed account of the different models, based on the principle of bounded rationality, that have been suggested over the years in travel behaviour analysis. The potential relevance of these models is articulated, model specifications are discussed and a selection of empirical evidence is presented. Aspects of an agenda of future research are identified.

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