Bounded rationality

Bounded Rationality
Definition of Bounded Rationality
This is the theory that there is only so much information that humans can be aware of. Therefore,when making decisions they base them on a limited choice.

Bounded rationality
A theory of human decision making that assumes that people behave rationally, but only within the limits of the information available to them.

bounded rationality: Models of bounded rationality are defined in a recent book by Ariel Rubinstein as those in which some aspect of the process of choice is explicitly modeled.

1982. Models of Bounded Rationality and Other Topics in Economic Theory. 2 vols. Cambridge: MIT Press.
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Two others main objections to the RE hypothesis (REH) come from the bounded rationality literature. First, it may be a very strong assumption that agents know the true stochastic process of the variables they need to forecast.

Some have argued that a kind of bounded rationality makes more sense for such models.

An American economist and social scientist who won the Nobel Memorial Prize in Economics in 1978 for his contributions to modern business economics. Herbert Alexander Simon's theory of bounded rationality says that individuals do not make perfectly ...

See also: Rationality, Optimal, Theories, A priori, Classical economics