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Ecological RationalityIntelligence in the World$
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Peter M. Todd and Gerd Gigerenzer

Print publication date: 2012

Print ISBN-13: 9780195315448

Published to Oxford Scholarship Online: May 2012

DOI: 10.1093/acprof:oso/9780195315448.001.0001

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Designed to Fit Minds

Designed to Fit Minds

Institutions and Ecological Rationality

16 Designed to Fit Minds
Ecological Rationality

Will M. Bennis

Konstantinos V. Katsikopoulos

Daniel G. Goldstein

Anja Dieckmann

Nathan Berg

Oxford University Press

Economic models of benefit–cost analysis assume decision makers choose so as to maximize net benefits given stable internal preferences. But institutional structure can play a central role in determining whether or not an agent’s decisions promote their individual preferences. This chapter explores four cases where the interaction between institutional structure and non-optimizing human decision processes does a better job than optimizing models at explaining choice. These cases suggest that institutions are often designed to fit minds. In some cases these designs rely on existing heuristics and their building blocks (organ donation rules, slot-machine design), while in other cases institutions design new lexicographic heuristics to help make decisions fast and unambiguous (driving right-of-way rules, World Cup soccer team ranking rules).

Keywords:   benefit−cost analysis, default heuristic, institutional design, lexicographic strategy, organ donation, preference stability, traffic right-of-way, slot machines, ranking rules

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