Bounded Rationality

Description of Bounded Rationality. Explanation.

Definition Bounded Rationality. Description.

"Bounded Rationality" is a term for the phenomenon that cognitive blinders prevent people from seeing, seeking, using, or sharing relevant, accessible, and perceivable information during decision-making. The bounded rationality phenomenon challenges traditional rationalist perspectives and suggests that the rationality of actual human and company behavior is always partial, or ‘bounded’ by human limitations.

This management concept recognizes that decision making takes place within an environment of incomplete information and uncertainty. Herbert Simon pointed out that most people are only partly rational, and are in fact emotional and irrational in the remaining part of their actions. They experience limits in formulating and solving complex problems and in processing (receiving, storing, retrieving, transmitting) information.

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End of description Bounded Rationality. An explanation.