Bounded rationality describes the
limitations of rationality and emphasizes the decision making processes often
used by individuals or teams. Herbert Simon, a management scholar, introduced
the bounded rationality process in the mid-1950s. It won him the 1978 Nobel
Prize in economics for his “pioneering research into the decision-making
process within economic organizations.” This process helps to explain why
different individuals or teams may make different decisions when they have
exactly the same information
.
Bounded rationality reflects the
individual’s or team’s tendencies to:
(1) select less than the best goal or
alternative solution (that is, to satisfice),
(2) undertake a limited search
for alternative solutions, and
(3) cope with inadequate information and control
of external and internal environmental forces influencing the outcomes of
decisions