What is bounded rationality?

Bounded rationality refers to the theory of human decision making that assumes that people behave rationally, but only within the limits of the information available to them. Because their information may be inadequate (bounded) they make take decisions that appear to be irrational .

In terms of looking for larger classes of examples of bounded rationality:

  1. I think when the situation, environment, scarcity, added stress, added pressure, or timing results in more emotional decision-making.

  2. Presumably any time a cognitive bias is involved.

  3. Lack of information can create bounded rationality.

  4. If you’re not approaching a problem with the right paradigm—such that you think you’re in the wrong story or situation for the approach you are taking. Some might also call this a category mistake.