The Structure of the Environment and the Complexity of Rational Choice Procedures

Abstract

Beginning with Herbert Simon, the literature on bounded rationality has investigated in great detail how internal limitations affect an agent’s choice process. The structure of the choice environment, deemed as important as internal limitations by Simon, has been mostly ignored. We introduce a model of the environment and its interaction with an agent’s choice process. Focusing on online environments where an agent can use filter and sort functionality to support his decision-making, we show, a choice process relying on the environment can be rationalized. Moreover, for sufficiently many alternatives, filtering and sorting are quick ways to choose rationally.

Keywords: Environment, Choice Procedure, Complexity