Satisficing
Satisficing is a
Simon formulated the concept within a novel approach to rationality, which posits that
In decision-making research
In decision making, satisficing refers to the use of aspiration levels when choosing from different paths of action. By this account, decision-makers select the first option that meets a given need or select the option that seems to address most needs rather than the "optimal" solution.
- Example: A task is to sew a patch onto a pair 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 that 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 concerns 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 satisfactory retirement income may not know what level of wealth is required—given uncertainty about future prices—to ensure a satisfactory income. In this case, the individual can only evaluate outcomes on the basis of their probability of being satisfactory. If the individual chooses that outcome which has the maximum chance of being satisfactory, then this individual's behavior is theoretically indistinguishable from that of an optimizing individual under certain conditions.[8][9][10]
Another key issue concerns an evaluation of satisficing strategies. Although often regarded as an inferior decision strategy, specific satisficing strategies for inference have been shown to be ecologically rational, that is in particular decision environments, they can outperform alternative decision strategies.[11]
Satisficing also occurs in consensus building when the group looks towards a solution everyone can agree on even if it may not be the best.
- Example: A group spends hours projecting the 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 are 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 good enough to close the book on the budget.
Optimization
One popular method for rationalizing satisficing is optimization when all costs, including the cost of the optimization calculations themselves and the cost of getting information for use in those calculations, are considered. As a result, the eventual choice is usually sub-optimal in regard to the main goal of the optimization, i.e., different from the optimum in the case that the costs of choosing are not taken into account.
As a form of optimization
Alternatively, satisficing can be considered to be just
where Is denotes the Indicator function of S, that is
A solution s ∈ X to this optimization problem is optimal if, and only if, it is a satisficing option (an element of S). Thus, from a decision theory point of view, the distinction between "optimizing" and "satisficing" is essentially a stylistic issue (that can nevertheless be very important in certain 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:[12]
In my opinion there is room for both 'optimizing' and 'satisficing' models in business economics. Unfortunately, the difference between 'optimizing' and 'satisficing' 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 be an unsatisfactory result in a satisficing model. The best things would therefore be to avoid a general use of these two words.
Applied to the utility framework
In
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 U* the solution to
with the optimum actions being the set O of options such that U(s*) = U* (i.e. it is the 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 introduced by Herbert A. Simon and developed in economics by Richard Cyert and James March in their 1963 book A Behavioral Theory of the Firm.[14] The aspiration level is the payoff that the agent aspires to: if the agent achieves at least this level it is satisfied, and if it does not achieve it, the agent is not satisfied. Let us define the aspiration level A and assume that A ≤ U*. Clearly, whilst it is possible that someone can aspire to something that is better than the optimum, it is in a sense irrational to do so. So, we require the aspiration 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 ∈ S if and only if A ≤ U(s). Clearly since A ≤ U*, it follows that O ⊆ S. That is, the set of optimum actions is a subset 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 the optimum and the aspiration as ε where ε = U* − A. Then the set of satisficing options S(ε) can be defined as all those options s such that U(s) ≥ U* − ε.
Other applications in economics
Apart from the behavioral theory of the firm, applications of the idea of satisficing behavior in economics include the Akerlof and Yellen model of
Endogenous aspiration levels
What determines the aspiration level may be derived from past experience (some function of an agent's or firm's previous payoffs), or some organizational or market institutions. For example, if we think of managerial firms, the managers will be expected to earn
An economic example is the Dixon model of an economy consisting of many firms operating in different industries, where each industry is a duopoly.[18] The endogenous aspiration level is the average profit in the economy. This represents the power of the financial markets: in the long-run firms need to earn normal profits or they die (as Armen Alchian once said, "This is the criterion by which the economic system selects survivors: those who realize positive profits are the survivors; those who suffer losses disappear"[19]). We can then think what happens over time. If firms are earning profits at or above their aspiration level, then they just stay doing what they are doing (unlike the optimizing firm which would always strive to earn the highest profits possible). However, if the firms are earning below aspiration, then they try something else, until they get into a situation where they attain their aspiration level. It can be shown that in this economy, satisficing leads to collusion amongst firms: competition between firms leads to lower profits for one or both of the firms in a duopoly. This means that competition is unstable: one or both of the 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 aspirations, which can only happen when all firms earn average profits. In general, this will only happen if all firms earn the joint-profit maximizing or collusive profit.[20]
In personality and happiness research
Some research has suggested that satisficing/
The distinction between satisficing and maximizing not only differs in the decision-making process, but also in the post-decision evaluation. 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 relatively pleased with their decisions, maximizers tend to be less happy with their decision outcomes. This is thought to be due to limited cognitive resources people have when their options are vast, forcing maximizers to not make an optimal choice. Because maximization is unrealistic and usually impossible in everyday life, maximizers often feel regretful in their post-choice evaluation.[22]
In survey methodology
As an example of satisficing, in the field of
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, respondent 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 questions 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
References
- ISBN 978-0-19-861035-9.
- ISBN 978-0863777080.
- S2CID 8503301. (page 129: "Evidently, organisms adapt well enough to 'satisfice'; they do not, in general, 'optimize'."; page 136: "A 'satisficing' path, a path that will permit satisfaction at some specified level of all its needs.")
- S2CID 249320959.
- .
- OCLC 356505.
- JSTOR 1808698.
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- PMID 8888650.
- JSTOR 3439096.
- ISBN 978-0-333-76061-1.
- ISBN 978-0-631-17451-6.
- JSTOR 1821349.
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- JSTOR 2297445.
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- S2CID 36045710.
- ^ Dixon (2000), Theorem 1 page 228. for a non-technical explanation see Chapter 8, Surfing Economics by Dixon H
- doi:10.1086/657022.
- PMID 12416921.
- ISSN 0888-4080.
- PMID 15012463.
Further reading
- Byron, Michael (1998). "Satisficing and Optimality". S2CID 170867023. A paper on satisficing considered from a philosophicalviewpoint.
- Byron, M. (2004). Satisficing and Maximizing: Moral Theorists on Practical Reason. New York: Cambridge University Press. ISBN 978-0521811491.
- Bearden, J. N.; Connolly, T. (2008). "On Optimal Satisficing: How simple policies can achieve excellent results". In Kugler, T.; Smith, J. C.; Connolly, T.; et al. (eds.). Decision Modeling in Uncertain and Complex Environments. New York: Springer. ISBN 9780387771311.
- Dixon, Huw (2001). "Donut world and the duopoly archipelago" (PDF). Surfing Economics: Essays for the Inquiring Economist. New York: Palgrave. ISBN 978-0333760611.
- Holbrook, A.; Green, M.; Krosnick, J. (2003). "Telephone versus Face-to-Face Interviewing of National Probability Samples with Long Questionnaires: Comparisons of Respondent Satisficing and Social Desirability Response Bias". doi:10.1086/346010.
- Krosnick, J. (1991). "Response Strategies for coping with the cognitive demands of attitude measures in surveys". Applied Cognitive Psychology. 5 (3): 213–236. .
- Simon, H. A. (1957). Models of Man: Social and Rational. New York: Wiley.
- Simon, H. A. (1978). "Rationality as Process and Product of Thought". JSTOR 1816653.
- Simon, H. A. (1983). Reason in Human Affairs. Stanford: Stanford University Press. ISBN 978-0804711791.