Competitive Rationality: A Critical Reading of the Literature on Rational Choice and Competitive Strategic Decision-Making

Abstract

This research addresses a central problem in economics and management: although the term competitiveness is widely used in economic and marketing literature, it still lacks a comprehensive and precise definition, often conflated with adjacent concepts such as competitive advantage, competitive capability, and productive efficiency. Accordingly, the study traces the evolution of the concept of rationality in economic thought, beginning with the classical model based on expected-utility maximization, moving through the Carnegie School's critique that produced the bounded-rationality model, and culminating in the theory of competitive rationality developed by Dickson (1992) as a synthetic framework explaining competitive behavior in oligopolistic markets.
The study relies on a descriptive-analytical method grounded in critical literature review, classifying prior studies along two axes: a theoretical axis concerned with grounding the concepts of competition and rationality, and an applied axis discussing the determinants of procedural rationality in strategic decision-making, such as competitive threat, stakeholder influence, and environmental uncertainty. The research finds that competitive rationality is not a fixed state but a dynamic, self-renewing process shaped by successive cycles of innovation and imitation, and that firm success in a competitive environment depends more on continuous learning and rapid responsiveness than on possessing complete market knowledge.
The study further shows that applying this framework in the Arab context, particularly the Libyan one, encounters institutional and market specificities that call for further field studies to verify the validity of hypotheses drawn from Western literature. The research recommends integrating organizational learning and customer orientation into the strategies of Arab firms as key drivers of sustainable competitive advantage.