Rationality, Bounded

Tom Christensen

Bounded or limited rationality is a term coined by Herbert Simon in his theory of decision-making processes in administrative organizations. It focuses on the different types of limitations that actors or decision makers in formal or administrative organizations have when they make decisions. Decision makers have to make a selection of decision premises—goals, preferences, problems, solutions/alternatives, and potential consequences—to cope with these limitations when making decisions. The concept of bounded rationality relates to what kind of limitations actors have, how they can cope with these limitations, and what the effects of bounded rationality are. Bounded rationality is connected to the concept of “administrative man” and can be seen as a critique of and modification of the concept of “economic man”—in other words, the theory of full rationality. Bounded rationality relates to the concept of “satisficing,” meaning that decision makers are choosing decision premises that are “good enough,” while economic Many ...

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