Bounded Rationality

Bounded rationality is the idea that human rationality is limited when people make decisions, and that under these limitations a rational individual will select a decision that is merely satisfactory rather than fully optimal. The limitations bounding a decision include the inherent difficulty of the problem itself, the cognitive capability of the mind doing the deciding, and the amount of time actually available to make the decision, so that decision-makers act as satisficers, seeking a solution that is good enough with the resources they have at the moment rather than undertaking a full cost-benefit analysis to identify the truly optimal choice. The concept, which complements the idea of rationality as pure optimization found in models such as rational choice theory, was developed to address the discrepancy between the assumption of a perfectly rational human decision-maker used in many social-science models and how people actually reason and choose under real constraints.