Bounded Rationality

We all face situations in life where we have to make decisions. But what if we don't have all the information? What if we can't weigh up all the pros and cons? How do we know which decision is best?

Herbert Simon's theory of bounded rationality provides a model for making limited, meaningful decisions in these types of situations.

What is Herbert Simon's Theory of Bounded Rationality?

Herbert Simon's Theory of Bounded Rationality is significant as it provides an explanation for why humans make decisions based on limited knowledge and cognitive capacity. By understanding the theory of bounded rationality, individuals can better understand their own decision-making process and take into account the limitations of their own cognitive capacities when making decisions. Additionally, organizations can use this concept to help structure decision-making processes and create frameworks that are suitable for individual decision-makers capacities.