Definition of Bounded Rationality
Bounded rationality is an alternative approach to decision making proposed by Herbert A. Simon. This approach put forward the idea that we only make a rational decision base on the limited information available or any cognitive limitation developed by us in our mind.
Economists see human beings as ‘satisficers’ rather than ‘economic superman’ who try to find out solutions that satisfy their needs. We do not undertake a full cost-benefit analysis to make a decision rather we choose an option which satisfies our need and wants without considering every possibility.