Bounded Rationality
Bounded rationality is the idea that people are limited in their ability to make rational decisions due to a number of factors, including:
Time constraints
People may not have enough time to gather all the information they need to make the best decision.
Cognitive limitations
People have limited attention capacity and knowledge.
Inaccurate information
People may make decisions based on information that is incomplete or inaccurate.
Emotions and prejudices
People may be influenced by emotions or prejudices that distort their judgment.
When people are faced with these limitations, they may choose a decision that is satisfactory rather than optimal. This is known as "satisficing".
The term was coined by Nobel laureate Herbert Simon, who proposed it as a more realistic alternative to the "perfect rationality" assumed by the neoclassical model.