Modeling the Interacting Decision Maker with Bounded Rationality

An analytic characterization of the process of executing a well-defined decision-making task by a human decision maker is presented. A basic two-stage model of this process is introduced in which exter-nal situations are first assessed and then responses are selected. An information theoretic framework is used in which total internal activity is described in terms of internal coordination and internal decision-making, as well as throughput and blockage. A constraint on the rate of internal processing is suggested as a model of bounded rationality. The model is extended to include basic interactions in an organizational context: Direct control is modeled as a restriction on internal decision-making by external commands while indirect control is incorporated through an auxiliary situation assessment input received from the organization