| Dessription |
Bounded rationality is the idea that rationality is limited when individuals make decisions. In other words, human "preferences are determined by changes in outcomes relative to a certain reference level". Limitations include the difficulty of the problem requiring a decision, the cognitive capability of the mind, and the time available to make the decision. Decision-makers, in this view, act as satisfiers, seeking a satisfactory solution, rather than an optimal solution. Therefore, humans do not undertake a full cost-benefit analysis to determine the optimal decision, but rather, choose an option that fulfils their adequacy criteria. |
