What is Satisficing in economics? Satisficing occurs when we minimize the resources we use to make a decision. A prime example of satisficing is the case when a student chooses between two colleges. Rather than selecting the college with the best student-faculty ratio, a student may choose the college with the best sports teams and clubs. Satisfying a student’s desires is the key to maximizing the amount of resources the university has available to them.
This theory is based on cognitive heuristics and behavioral science. It is applied in economics, artificial intelligence, and sociology. In other words, a consumer will only select a product that is GOOD ENOUGH for them. Traditional economists argue that this principle is a sign of inferiority and insufficient in our ability to make rational decisions. Satisficing is more like a toolbox of choices that help humans make decisions and achieve goals.
Satisficing occurs in consensus-building situations. When a group agrees on a solution, they accept the “good enough” solution, rather than attempting to achieve the best possible outcome. For example, a group might spend hours projecting the budget for the next fiscal year. They arrive at a consensus, but one person asks if the projections are correct. This upsets the group because it has already made decisions and come up with a solution. Then, a member of the group says, “No,” because the projection may not be correct.
Another example is where a firm is satisfied with its existing technology and does not demand improvements. The firm may have several solutions, but only one is good enough. A firm may continue to use the initial solution, but it may be inefficient to implement the optimal solution. Moreover, the firm may not be able to improve the technology. The firm may also choose not to improve on the technology because it isn’t perfect enough.
Profit satisfaction occurs when ownership and control are separated. Owners typically have different goals than workers. For example, an owner wants maximum profits, while a manager’s goal is to maximize profit. Owners often delegate control of the firm to the manager, who is supposed to maximize profits. Usually, the latter does not share their goal, and this type of profit satisfaction is suboptimal for both parties.
In contrast, satisficers are less likely to regret their decisions. Satisficers also report higher levels of self-esteem and happiness. Maximizers are perfectionists, and they scrutinize every university and college they can find. They compare the merits and shortcomings of each college based on external factors, including social status, reputation, and other factors. But when comparing satisficers to maximizers, it is obvious that satisficers tend to be happier than maximizers.
In conclusion, satisficing is a decision-making strategy that allows people to make quick, efficient decisions by finding the first option that meets their needs. While this may not always be the best option, it is often good enough. Satisficing can help people save time and energy, and it can be used in both personal and professional settings.