Satisficing

The Basic Idea

Imagine that you want to purchase a television. There are certain criteria that you want your TV to meet: you want it to have Ultra HD, be at least 55” in size, and be a Smart TV. Even with that criteria in mind, there are hundreds of different available TVs you could purchase, which also means there is a vast amount of information you could obtain to make the best decision – but that would be incredibly time consuming. Instead, you are likely to pick a TV that satisfies your criteria, whether or not it is the absolute best possible option. This kind of consumer decision is called satisficing.

Satisficing is a decision-making process in which an individual makes a choice that is satisfactory rather than optimal.2 It would require a great deal of effort – and may not even be possible – to gather all the necessary information in order to make the best decision, and satisficing thus represents the kinds of decisions we are actually capable of making. Satisficing is all about making ‘good enough’ decisions instead of perfect ones.

Satisficing and heuristics save time, cost and resources and are therefore efficient, fast and frugal.

– Gerd Gigerenzer and Peter Todd in Simple Heuristics That Make Us Smart

Key Terms

Optimization/Maximization: the opposite decision-making process of satisficing. Optimization requires obtaining all the necessary data to be able to make the most optimal choice. The optimal choice is usually considered the one that maximizes utility, according to traditional economy theory.

Bounded rationality: a decision-making process in which we attempt to satisfice rather than optimize due to constraints such as time, available information, and mental capacity. Our rationality is ‘bounded’ by these factors.

Ecological rationality: a theory that suggests that in a context or environment when uncertainty is high, heuristics will actually outperform rationality. The things that cause bounded rationality (cognitive biases, time and brain capacity) reflect obstacles we will encounter in the environment, which suggests bounded rationality is more suitable. 3

Heuristics: mental shortcuts that facilitate problem solving by using generalizations and rules-of-thumb. Heuristics are time-effective and commonly employed for the purpose of snap decisions and judgments; however, they can cause people to deviate from rational decision-making.

Choice architecture: the design of environments that attempt to nudge people toward specific choices, taking advantage of humans’ tendency to satisfice.4

History

Traditional economic theory is based on the faulty belief that humans are purely rational decision makers. Models and predictions in traditional economics are made with the homo economicus in mind: a fictional, perfectly rational, being. 5

However, in order to make perfectly rational decisions, we would have to be aware of not only all the choices available to us, but also the data that is relevant to each choice. In the 1950s, behavioral psychologists, who understood that navigating day-to-day life requires people to make hundreds of decisions within a limited time frame, wanted to come up with a new theory for decision-making processes that more accurately captured real life.

Satisficing emerged from the field of behavioral economics, which, unlike traditional economics, took into account factors other than maximizing utility when understanding the way that humans make decisions. Utility maximization suggests people will make decisions that benefit them the most economically. Originally, satisficing and heuristics were discussed only in negative terms: as deficiencies in human decision-making processes that cause us to make suboptimal decisions. This was the view that social scientist Herbert A. Simon held when he first coined the term satisficing in 1956. In his 1956 paper, “Rational Choice and the Structure of the Environment”, he wrote:

It appears probable that, however adaptive the behavioral of organisms in learning and choice situations, this adaptiveness falls short of the ideal of ‘maximizing’ postulated in economic theory. Evidently, organisms adapt well enough to ‘satisfice’; they do not, in general, ‘optimize’.” 6

He used the term ‘satisfice’ as a combination of the words ‘satisfy’ and ‘suffice’, which captures the process through which individuals make decisions that satisfy their criteria.2 He used a scissor metaphor to describe why traditional economic theory and optimization were insufficient models for looking at decision-making. One blade of the scissor represented humans’ limited brain capacity, while the other blade represented their typical decision-making environment.7 Combined, Simon wrote that the intersection of these blades often leads to satisficing rather than optimizing.

Simon’s understanding of satisficing challenged perfect rationality and homo economicus, two foundational principles of traditional economics. Although Simon understood satisficing as evidence of humans’ cognitive limitations, some people, upon further research, have begun to understand satisficing as a tool, rather than a deficiency.

People

   

Herbert Simon

The social scientist who coined the term satisficing after observing how people behaved in real life, which contradicted the homo economicus principle of traditional economics.

Gerd Gigerenzer

Departing from the belief that heuristics and cognitive biases are negative aspects of human behavior, Gigerenzer is a big proponent of satisficing. While rational analyzing usually separates the goal of behavior from the mechanisms that cause the behavior, Gigerenzer suggests these mechanisms, such as satisficing, allow people to adequately achieve their goals by saving time, effort and costs.5

Peter Todd

Co-author, alongside Gigerenzer, of the book Simple Heuristics That Make Us Smart. This book holds the view that heuristics, like satisficing, are part of an ‘adaptive toolbox’ that humans must employ because of various constraints of decision-making processes.8 Together with Gigerenzer, Todd describes satisficing as a form of ecological rationality.

Daniel Kahneman

Following Simon’s work on satisficing, Kahneman went a step further to demonstrate that it is not only constraints such as time, resources and brain capacity that cause people to deviate from perfect rationality, but other human features like moods, emotions and cultural beliefs. By incorporating these other aspects into his theories, Kahneman suggested that the context under which people make decisions matters and often means that people are in fact making the best decision for themselves through satisficing, since they are working within the confines of their physical and psychological environment.9

Consequences

Whether for good or bad, humans are often satisficers rather than optimizers. Satisficing, as a decision-making process, guides much of our daily behavior, making it important that we understand how it impacts our choices. When we acknowledge that our decision-making processes are often limited by certain constraints, we can try to ensure that even when satisficing, we use the available information to the best of our ability to get as close as possible to the best choice. Additionally, it means that corporations, politicians, and technology can ensure they transmit the most important information we need to make decisions because they know that humans tend to be satisficers.

Satisficing has large implications for user experience (UX) designers, who design technology to be as user-friendly as possible. Satisficing informs designers that users will not peruse all the information on a webpage, or on a browser, because they will stop reading information once they feel they have enough data to make an informed, satisfactory decision. UX designers, therefore, need to ensure that the most pertinent information is the easiest to find and is relayed in as few words as possible, in order to satisfy humans’ limited attentional capacities.10 Similar principles can be employed to structure the way that information is presented through search engines. Google, for example, could ensure that when someone searches for information about COVID-19, the first few links are government pages that give people important, factual information.

However, it is equally important to understand the ways that businesses use their understanding of satisficing to manipulate our decisions. Such manipulation is common with regards to food marketing. If we are looking to make a healthy choice, for example, we might look for food that is labelled ‘sugar-free’ without taking the time to consider the fact that when there is no sugar, there are often other unhealthy additives. On the other hand, by knowing that we are susceptible to such fallacies in our decision-making processes, businesses can use choice architecture to nudge us towards making optimal decisions, like placing healthy food options at the front of a grocery store. Just because humans might not be optimizers does not mean we can’t be pushed towards optimal choices.

Controversies

The controversy surrounding satisficing usually surrounds whether satisficing is a human advantage or a human inadequacy. Is satisficing a help or a hindrance?

If you ask traditional economists, they will say that satisficing is a deficiency because it deviates from perfect rationality. Even if satisficing reflects the way people actually make decisions, optimizing represents the way we should make decisions. Optimizing might therefore be prescriptive whereas satisficing is simply descriptive, causing traditional economists to question its value. For example, can models that incorporate satisficing be created to predict or understand human behavior?

Following this question, another criticism of satisficing is that it is next to impossible to determine what constitutes a satisfactory choice.2 Refer back to the thought experiment where you want to buy a TV. What would constitute a satisfactory choice in this scenario? A TV that meets all three criteria? A TV that doesn’t have one of the three criteria but is much cheaper than the rest? A TV that makes you happy? Arguments could be made that any one of these three choices would be satisfactory. Since it is hard to determine what counts as a satisfactory choice, it is also hard to compare how different the outcome could be if rational optimizing were employed.2

Satisficing and optimizing might also have different goals. While optimizing might make someone make a choice that maximizes utility, satisficing might lead to a choice that makes someone happier. For example, a study suggested that while recent college graduates with optimizing tendencies accepted jobs that paid 20% higher on average, these students were also less satisfied with the jobs they accepted. The study suggested that satisficers are less likely to second guess their decisions, perhaps because they don’t go looking for additional information that would make them regret their choice.11

While satisficing can lead to suboptimal decisions, it also increases efficiency. Thus, the effectiveness of satisficing is context dependent: there are instances when satisficing benefits, us, and ones when it does not. For daily mundane decisions, trying to gain all possible information would be time-consuming and impractical, especially since these decisions are unlikely to have a significant impact on one’s quality of life. Alternatively, we may hope that big businesses or country leaders find out all possible information before proceeding with a project because those decisions can greatly impact people’s lives, so the best decision should be made.

Case Studies

Morality in the face of satisficing

Gerd Gigerenzer, who has spent much of his career examining satisficing and bounded rationality, suggests that moral behavior is usually based on satisficing instead of optimizing. While many people suggest that satisficing in moral dilemmas lead to suboptimal decisions, Gigerenzer states that satisficing can often actually lead to better outcomes than optimizing.12

Satisficing can be thought of as a process through which people choose the first option they encounter that satisfies them. With this in mind, Gigerenzer explains how moral satisficing is an accurate representation of how people morally act. He outlines the organ donor dilemma: very few people in the U.S (12% of the population) are organ donors, which results in about 5000 Americans dying every year waiting for a donor. Alternatively, 99.9% of the French and Austrian population are donors.12 Gigerenzer states that if becoming a donor was a choice that hinged on deliberate, rational thought, then providing information to Americans on the need for organ donation would increase the number of donors. However, a 2003 study (Johnson & Goldstein) shows that information campaigns do not help. Instead, the difference between the U.S system of having to opt-in to being a donor, versus the French and Austrian systems of having to opt-out of being an organ donor, is the cause behind the difference. Gigerenzer states that this discrepancy is due to satisficing: if there is a default choice that is satisfactory, people will not bother to change it.12

Knowing that people are moral satisficers can help governments shape their policies. For organ donation, this can mean making the default option being an organ donor and allowing people to opt-out if they want.

How Satisficing Can Improve your Dating Life

In the modern world of dating-apps, people are given an almost endless stream of choices of who to date. While this may seem positive, research has shown that it actually leads to us being less likely to find someone with whom we really connect.13 This is known as choice overload: we find it harder to make decisions when there are too many options to choose from.

Dating apps have essentially turned us into optimizers when it comes to love because we are presented with an overload of information under which we have to make a decision. Just as the study on student optimizers demonstrated, optimizers tend to second-guess their decisions. This means that even if you enjoyed your date with someone, you might continue to hold onto the idea that there is someone better out there.13

For this reason, satisficing might be a better mindset under which to date. If you are a satisficer, and someone meets the criteria you are looking for in a partner, you are less likely to hold out for something better and more likely to realize that what is in front of you meets your needs.13 It might not be romantic to think about choosing someone based on whether they are satisfactory, but an inability to choose anyone at all because of optimizing may not result in the most optimal outcome.13

Related TDL Content

Overwhelmed by Choice: Consumers and Green Energy

Climate change is an ever-growing concern in modern society. In this article, our writer Anastasia Gavrilova examines the ways that ‘green’companies can use satisficing to their advantage to nudge people towards earth-friendly decisions.

Algorithms for Simpler Decision-Making: Fighting Irrationality with Nonrationality

This article examines a fundamental difference between humans and technology: humans satisfice, while algorithms optimize.. Our writer, Jason Burton, discusses the implications of this difference: algorithms often can’t be well integrated with human nonrationality. Burton proposes that algorithms begin to operate under nonrationality instead, in order to be able to link the human mind to technology, in order to encourage better decision making in humans.

Sources

  1. Knowledge Brief Management. (n.d.). Satisficing. Retrieved November 10, 2020, from https://www.kbmanage.com/concept/satisficing
  2. Frankenfield, J. (2020, January 31). How Satisficing Works. Investopedia. https://www.investopedia.com/terms/s/satisficing.asp
  3. Todd, P. M., & Gigerenzer, G. (2012). Ecological rationality: Intelligence in the world. Oxford University Press.
  4. Behavioral Economics. (2019, March 28). Choice architecture. https://www.behavioraleconomics.com/resources/mini-encyclopedia-of-be/choice-architecture/
  5. Stanford Encyclopedia of Philosophy. (2018, November 30). Bounded rationality. https://plato.stanford.edu/entries/bounded-rationality/#BettBoun
  6. Simon, H. A. (1956). Rational choice and the structure of the environment. Psychological Review, 63(2), 129-138. https://doi.org/10.1037/h0042769
  7. Simon, H. A. (1990). Invariants of human behavior. Annual Review of Psychology, 41(1), 1-20. https://doi.org/10.1146/annurev.ps.41.020190.000245
  8. University of Alberta. (n.d.). Peter M. Todd. University of Alberta Psychology. Retrieved November 10, 2020, from https://www.psych.ualberta.ca/~pdixon/BASICS/2008/Abstracts/Todd.html
  9. Farry, S. (n.d.). Thinking, fast and slow by Daniel Kahneman. Graziadio Business Review. Retrieved November 10, 2020, from https://gbr.pepperdine.edu/book-corner/thinking-fast-and-slow-by-daniel-kahneman/
  10. The Interaction Design Foundation. (n.d.). What is satisficing? Retrieved November 10, 2020, from https://www.interaction-design.org/literature/topics/satisficing
  11. Heshmat, S. (2015, June 13). Satisficing vs. Maximizing. Psychology Today. https://www.psychologytoday.com/ca/blog/science-choice/201506/satisficing-vs-maximizing
  12. Gigerenzer, G. (2010). Moral satisficing: Rethinking moral behavior as bounded rationality. Topics in Cognitive Science, 2(3), 528-554. https://doi.org/10.1111/j.1756-8765.2010.01094.x
  13. Dodgson, L. (2018, May 24). You might still be single because of something called the ‘paradox of choice’ — here’s what it means. Business Insider. https://www.businessinsider.com/how-the-paradox-of-choice-could-explain-why-youre-still-single-2018-2

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