Definition
Satisficing is a decision-making strategy or cognitive heuristic that entails searching through the available alternatives until an acceptability threshold is met. The term satisficing, a portmanteau of satisfy and suffice, was introduced by Herbert A. Simon in 1956, although the concept was first posited in his 1947 book Administrative Behavior. Simon used satisficing to explain the behavior of decision makers under circumstances in which an optimal solution cannot be determined. He maintained that many natural problems are characterized by computational intractability or a lack of information, both of which preclude the use of mathematical optimization procedures. He observed in his Nobel Prize in Economics speech that “decision makers can satisfice either by finding optimum solutions for a simplified world, or by finding satisfactory solutions for a more realistic world.
Satisficing
What does ‘Satisficing’ mean
Satisficing is a decision-making strategy that aims for a satisfactory or adequate result, rather than the optimal solution. This is because aiming for the optimal solution may necessitate needless expenditure of time, energy and resources. The term “satisfice” was coined by American scientist and Noble-laureate Herbert Simon in 1956.
Explaining ‘Satisficing’
The theory of satisficing finds application in a number of fields including economics, artificial intelligence and sociology. Satisficing implies that a consumer, when confronted with a plethora of choices for a specific need, will select a product or service that is “good enough”, rather than expending effort and resources on finding the best possible or optimal choice.
Further Reading
- Chinese bank efficiency during the global financial crisis: A combined approach using satisficing DEA and Support Vector Machines☆ – www.sciencedirect.com [PDF]
- The psychology of residential developers: lessons from behavioral economics and additional explanations for satisficing – journals.sagepub.com [PDF]
- Satisficing in financial decision making—a theoretical and experimental approach to bounded rationality – www.sciencedirect.com [PDF]
- Incorporating risk into bank efficiency: A satisficing DEA approach to assess the Greek banking crisis – www.sciencedirect.com [PDF]
- Strategic satisficing? A behavioral-agency theory perspective on stock repurchase program announcements – journals.aom.org [PDF]
- Home bias in financial markets: robust satisficing with info gaps – papers.ssrn.com [PDF]
- Towards a" satisficing" theory of economic policy – www.jstor.org [PDF]
- Satisficing measures for analysis of risky positions – pubsonline.informs.org [PDF]
- Is satisficing absorbable? An experimental study – www.tandfonline.com [PDF]
