Bounded rationality
Bounded rationality is a concept in Decision theory that suggests that individuals make decisions based on limited information, cognitive biases, and constraints on their ability to process information. This idea was first introduced by Herbert Simon, who argued that people do not always act rationally, but rather make decisions that are "good enough" given the limitations of their knowledge and cognitive abilities. Bounded rationality is often contrasted with the idea of Rational choice theory, which assumes that individuals make decisions based on complete and accurate information. In reality, people are influenced by Cognitive biases, Heuristics, and other factors that limit their ability to make optimal decisions. Understanding bounded rationality is important in fields such as Economics, Psychology, and Artificial intelligence, where it can inform the development of more realistic models of human decision-making.