What does bounded rationality mean?

bounded rationality meaning in Business Dictionary

Concept that decision manufacturers (irrespective of their standard of cleverness) must work under three unavoidable limitations: (1) just limited, usually unreliable, information is available with regards to feasible alternatives and their particular consequences, (2) real human mind has only restricted capacity to evaluate and process the knowledge that's available, and (3) just a finite length of time is available to create a determination. Consequently even people who plan to make rational choices tend to be bound in order to make satisficing (versus maximizing or optimizing) alternatives in complex situations. These limits (bounds) on rationality additionally make it extremely difficult to-draw up agreements which cover every contingency, necessitating reliance on recommendations. Suggested because of the United States Nobel-laureate economist Herbert Simon (1916-2001) inside the 1982 guide 'Models Of Bounded Rationality And Other Topics In Economics.' Match up against perfect rationality.