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Bounded Rationality

A patient with chest pain is admitted to the hospital to rule out a heart attack. Physicians need to decide quickly whether or not to send such patients to the Intensive Care Unit. In order to support doctors facing this question, researchers developed an extensive catalogue comprising about 50 decision criteria for doctors to consider when making their decision with the help of a formula and a calculator. The result: Fewer patients were falsely admitted to the Intensive Care Unit. When physician returned to their clinic without the calculators, the results remained at the same improved level. Why? The physicians did not learn the formula by heart, nor did they understand it. Instead, they had memorized the most important criteria and ignored the rest. Physicians made good decisions by relying on a fast-and-frugal decision tree (see figure), which considered only three criteria.

Decision Tree Figure
© MPI für Bildungsforschung

Note:
This decision tree examines the most important criteria first. A patient is admitted to the Intensive Care Unit if there is a change in the ST-Segment (an anomaly in the ECG). If there is no anomaly in the ECG, the second feature is considered: Is chest pain the major complaint? If not, the patient is admitted to a regular hospital bed (which prevents overcrowding of Intensive Care Units). If yes, there is one last question with five additional criteria. If one of them is positive, the patient is admitted to the Intensive Care Unit. If not, the patient is admitted to a regular hospital bed. Doctors prefer this fast-and-frugal decision tree, because it is easy to understand and memorize (Gigerenzer, 2008).

Similar to emergency physicians, people often make decisions without knowing everything about their current situation or about what will happen in the future. Under these circumstances fully rational behavior and weighing all pros and cons is impossible and – as the example shows – often unhelpful. Boundedly rational people use simple rules of thumb (heuristics) such as the fast-and-frugal tree described above. Because simple heuristics only use a fraction of all possible decision criteria and ignore irrelevant information, they may work better in uncertain situations (less is more effect).

Key References

  • Gigerenzer, G., & Brighton, H. J. (2009). Homo heuristicus: Why biased minds make better inferences. Topics in Cognitive Science, 1, 107-143.
  • Gigerenzer, G., Hertwig, R. & Pachur, T. (Eds.) (2011). Heuristics: The foundations of adaptive behavior. New York: Oxford University Press.

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