Bounded rationality is a concept in behavioral economics suggesting that individuals make decisions within the constraints of limited information, cognitive abilities, and time.
Coined by Herbert A. Simon, it acknowledges that people often use heuristics or simplified decision-making strategies due to cognitive limitations.
Bounded rationality contrasts with the traditional economic assumption of perfect rationality. This concept recognizes that decision-makers aim for satisfactory outcomes, rather than optimal ones, given the complexities of real-world decision environments.
