What do you mean by bounded rationality?

 Rationality is the basic premise for decision-making as stated by Simon, he also rejects the concept of total rationality due to the unrealistic assumptions involved in it. Firstly, total rationality is based on the belief that decision makers are omniscient and they have knowledge about all available alternatives as well as their consequences. Secondly, the assumption ts that the decision-maker has unlimited computational ability. Finally, it believes that the decision maker has the capacity to put in order all the possible consequences. Simon says that these assumptions are fundamentally wrong.

      The human behaviour is neither totally rational nor totally irrational. Simon further states that the behaviour or knowledge is bounded by cognitive limits and this led to his concept of ‘bounded rationality’. While discussing the theory of Bounded Rationality, he also coined the term ‘satisficing*, which is derived from the words ‘satisfaction’ and ‘sufficing’. That is, while taking a decision, an individual does not explore all the alternatives that are available. Rather, an option that meets their aspiration level or satisfaction level is considered, instead of optimising decision. This real-world behaviour of individuals in making decisions is called ‘satisficing’ decision.

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