- Premises:
a) Departure from perfect rationality assumption
b) Departure from omniscience assumption
c) Departure from 'black box' assumption (look inside the
firm/household)
- Maximization of sales subject to profit constraints (Baumol,
1959)
- Maximization of growth of the firm (Robin Marris, 1963)
- Entrepreneurs may trade income(profits) for leisure (Psychic income)
(Scitovsky/ Greenhut)
- Locational mistakes are inevitable in an uncertain world; the economic
environment's active role in defining and suppressing 'mistakes'
(adaption/adoption)
- Satisficing as an alternative to maximizing (Aspiration Levels as
Targets), (Katona, Simon)
- Limitations to a rationality based on maximizing behavior:
(largely
Simon)
- Bounded rationality (cognitive limitations)
-
Intended rationality (purposefulness; behavior directed toward goals,
e.g. "profit seeking" behavior
- Subjective rationality (defined by individual)
- Selective rationality (Leibenstein) individuals select the extent
to which they deviate from maximizing behavior
- Procedural rationality (rationality applied to procedure &
not outcome)
- Multiplicity of goals:
(a) likelihood that sub-goals are inconsistent, need for bargaining
(b) individual utility maximization can destabilize intrafirm behavior
- Formation of coalitions to resolve conflict;
- or Sequential attention to goals (to avoid need to resolve conflicts)
resulting in, among other facets, INCREMENTAL adjustments
-
Locational behavior thrives on actual or expected FEEDBACK
-
Search is motivated, but simple-minded and biased (Cyert &
March)
-
Use of standard operating procedures (routines/rules for solving
problems)
-
Decision complexity is reduced by separating
(a) obligatory/ absolute, non-substitutable (sine qua non) locational
"requirements" (or "musts") from
(b) desirable, substitutable locational attributes ("wants")
-
Resistance to locational change unless under duress (stress and
strain) Maintenance of viability (survival); aversion to excessive
risk Need for 'slack' to stabilize coalitions & organizations
(to cover-up mistakes)
-
Decisions are outcomes of several independent 'streams' within
an organization, such as: streams of locational problems and needs,
locational solutions, participants, and locational choice opportunities
('Garbage can' situations).
-
Decisions are made by [see: Garbage can
model]
(a) 'oversight' (location selected without attention to objectives),
(b) 'flight' (locational needs 'find' a better potential solution,
old locational plans can be discarded) or
(c) 'resolution' (some, not necessarily all locational needs are
met)
"...It seems highly unsatisfactory to deal with individuals en
masse only and to assume that individual behavior is unpreditable in much
the same way as the behavior of individual molecules." (W. Isard & T.
Reiner)