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Bounded Rationality

ยท 3 min read

Bounded rationality is a concept in economics and decision theory that acknowledges the limitations of decision makers in terms of the information they have, their cognitive capabilities, and the finite time they have to make decisions. The term was coined by Herbert A. Simon, an economist and psychologist who noted that while traditional models of decision-making in economics and other fields assumed that individuals acted rationally to maximize their utility, real human behavior often deviates from this ideal due to practical constraints.