JF AAS August, 2000

Uncertainty in SSP Terms: Polar case of High Information Cost

S

S

P

HEINER 

Bounded rationality. 
High information processing cost even if info is available- fundamental uncertainty. 

Competence-Difficulty gap.* 
 
 

Fickle consumer 

"Fickle" technology and 
possible new products 

--------------------------------- 

*Different cognitive errors are possible: 
   Morphological, sensory, etc.

1. Try to use all available 
information 
 

2. Use SOP's (habits learned in business or social culture. 

Advertizing. 

Williamson's hostage 
between firms is not 
helpful against consumer defection. Allow firms to suppress new technology? 

3. Change has been so rapid that no SOP's have 
emerged. 
 

                         <------

1. Errors. Partly because can't predict others behavior. 

2. Acts of others are 
predictable. 
 

Consumer less fickle. 
 
 
 
 
 
 

3. Chaos. Can't predict. 

If SOP is wrong, 
does it correct the structure? 

--------<<

LITTLECHILD 

Future can't be represented 
by subjective probability 
distribution. 

Don't even know names of variables. 

Radical subjectivity.

1. U.S. firms related by 
contract but outside is 
fickle consumer and new 
product maker.

2. Japanese Kiertsu 
Firms are loyal to each other. Banks extend loan 
repayment if necessary. 

3. German banks loan to firms in the supply chain.

1. U.S. loses market share to Japanese and Germans. 
 

2. Working together to create an imagined 
future. 
 

3. Ditto

Where is power and conflict in all this? Is it in persuasive images of the future? Tie to macro economics: What happens when actors are pessimistic about the future as in downward business cycle?

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