Modelling cognitively bounded rationality: An evaluative taxonomy

Since its origins in the 1950s, the notion of bounded rationality has been incorporated into economic theory using an array of methodological approaches. This paper presents a taxonomy by which these approaches can be categorized and understood, evaluating each approach against a range of important criteria. At a time when the foundations of economic theory are being re-examined, this paper should be viewed as a first step towards an assessment of the appropriate role that this more realistic view of cognition should take in different areas of economic theory, and also of the desirable characteristics of models that incorporate it.