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Bounded Rationality - Explained

What is Bounded Rationality?

Written by Jason Gordon

Updated at May 13th, 2022

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Table of Contents

What is Bounded Rationality?How does Bounded Rationality Work?Academic Research on Bounded Rationality

What is Bounded Rationality?

Bounded rationality is the theory that when people make decisions, their ability to reason through the problem is limited by:

  • available information
  • cognitive capacity or ability,
  • time to think about the situation.


This management concept recognizes that decision making takes place within an environment of incomplete information and uncertainty.

Back to: RESEARCH, ANALYSIS, & DECISION SCIENCE

How does Bounded Rationality Work?

Decision-makers in this context are seeking a satisfactory solution rather than an optimal solution to the problem. Bounded rationality was proposed by Herbert A. Simon, a mathematical economist, as a method of modeling decision making as applied in economics, political science, and other relative disciplines. It looks at decision making as a fully cognitive process of finding an acceptable option given the available information.


bounded rationality

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