182 7: Decision Th eory
and each knows the range of choices available to the other. If prisoner Bill con-
fesses, he will get a shorter sentence than prisoner Al, and vice versa. If both Bill
and Al confess, they will both get long sentences. But if they cooperate (with each
other) and neither one nor the other confesses, then both may escape the charges.
As Bill makes his rational decision, he takes into account the range of Al’s possi-
ble rational decisions. Because Bill and Al are acting independently and simul-
taneously, each will tend to try to avoid the risk that the other will confess. So, it
is likely that they will not cooperate and remain silent (which is also a risk), and
each will decide to confess in his rational self-interest. By failing to cooperate and
to each pursue rational individual self-interest, both make suboptimal decisions.
Th e prisoners’ dilemma and dozens of variations of it are a part of modern
game theory (Rasmussen 1990; Radner 1985). Th is body of research has been very
infl uential in settings in which a fi rm needs to make decisions regarding location.
Th e pattern of cooperation-competition seen in modern shopping malls and auto
plazas is an example. In the public sector, such models have been usefully applied
to national defense policy and particularly to battlefi eld estimates of an enemy’s
actions. Such models have also been successfully used to describe bureaucratic
politics (Bendor and Moe 1985; Hammond 1986; Hammond and Knott 1999;
Hammond and Miller 1985; Moe 1984). As noted in the Conclusions, the fi eld of
public administration has much to gain by applying experimental methodology
to the issue of governance. Although there are clear biases in the way in which
information is processed, these patterns can be formalized in a manner that is
typical of the logic of consequences framework. As we discuss in Chapter 8, what
is required is a new theory, or for public administration, a new theoretical frame-
work for explaining decisionmaking, one that is by necessity multidisciplinary.
Bounded Decision Rationality and the Logic of Appropriateness
Th us far we have described decisions as intendedly rational individual choice
calculations and consequent institutional behavior. In this description, pure,
model-based, and boundedly rational decisions are evaluated according to their
results, the results being judged on the basis of values, objectives, and preferences.
We turn now to an understanding of rational decision theory in terms of the logic
of appropriateness. Th e logic of decision appropriateness traces to the work of
James G. March and Johan P. Olsen (1984, 1989) and March (1994, 1988), a body
of work that is both a convenient perspective on decisionmaking and a synthe-
sis of understandings of bounded rationality found primarily in sociology, social
psychology, and parts of business and public administration.
Following the logic of appropriateness, individuals and organizations are ra-
tionally goal oriented. But their rational behavior is oriented toward an under-
standing of goals that is less associated with assumptions of effi ciency, marketlike
competition, and self-interest and more associated with assumptions of rules,
identities, situations, and actions (Wright 1984). In both the decision logic of