Two Faces of Search: Alternative Generation and Alternative Evaluation

  • Authors:

  • Thorbjørn Knudsen;Daniel A. Levinthal

  • Affiliations:

  • Department of Marketing, University of Southern Denmark, 55 Campusvej, Odense 5230, Denmark;The Wharton School, University of Pennsylvania, Philadelphia, Pennsylvania 19104

  • Venue:
  • Organization Science
  • Year:
  • 2007

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Abstract

At its core, a behavioral theory of choice has two fundamental attributes that distinguish it from traditional economic models of decision making. One attribute is that choice sets are not available ex ante to actors, but must be constructed. This notion is well established in our models of learning and adaptation. The second fundamental postulate is that the evaluation of alternatives is likely to be imperfect. Despite the enshrinement of the notion of bounded rationality in the organizations literature, this second postulate has been largely ignored in our formal models of learning and adaptation. We develop a structure with which to capture the imperfect evaluation of alternatives at the individual level and then explore the implications of alternative organizational structures, comprising such individual actors, on organizational decision making.