Bounded rationality

Bounded rationality, in Simon’s administrative theory, describes intendedly rational choice constrained by knowledge, anticipation, attention, and the alternatives a decision-maker can consider. Actual choice falls short of examining every alternative and its full consequences. The concept concerns the decision process and its limits, not a claim that people have no purposes or reasons. (Chapter V, printed pp. 92–95; Commentary on Chapter V, printed pp. 118–119)¹

Uses in the literature

In his later commentary, Simon describes the person of bounded rationality through two changes to the model of economic man. First, that person satisfices rather than maximizes. Second, they act within a drastically simplified model of the world that considers only the few factors judged most relevant. Organizations can shape that environment of choice by supplying information and premises. Simplification enables action but can also produce errors when omitted effects matter. (Chapter V, printed pp. 92–95; Commentary on Chapter V, printed pp. 118–119)¹

Boundaries and related concepts

Satisficing is central to Simon’s account, but the two terms are not synonyms. Bounded rationality names the limits on choice and the simplified representation of the world. Satisficing names the criterion for choosing within those limits. An Agent may be evaluated against a rational-choice standard without possessing unlimited computation. The AIMA account in that entry and Simon’s account address related questions but should not be treated as interchangeable definitions.

A Context window is a specific model-input limit; bounded rationality is broader. More context alone does not establish that the relevant alternatives were generated or consequences understood. Decision premises concern what information and commitments structure a particular choice.

Operational example

An illustrative research assistant has time to inspect five candidate sources. Record what it inspected, why it stopped, and which alternatives remain unexplored. Assess its answer relative to the evidence actually available and the search procedure used; do not describe it as the best answer among all possible sources merely because it completed its budget.

Footnotes

1. Simon, Herbert A. Administrative Behavior: A Study of Decision-Making Processes in Administrative Organizations. Fourth edition. The Free Press, 1997. ISBN 9780684835822. Publisher edition. Inspected Chapter V, printed pp. 92–95 (PDF pp. 55–56), and Commentary on Chapter V, printed pp. 118–119 (PDF p. 68). The private scan uses two-page spreads. ↩ ↩²