bounded rationality

a model of human action in which choices are seen as limited and imperfect in terms of knowledge of the situation and expected outcomes; action is therefore never completely rational. The concept originated in the work of March and Simon (1958) and Simon (1957a & b) on DECISION MAKING in organizations. Their work was critical of the model or IDEAL TYPE of perfect rationality presented in economic theories of the firm; in contrast to the assumption of profit maximization in economic theory March and Simon argued that actual behaviour in organizations was SATISFICING rather than ‘optimizing’ in terms of the achievement of goals. This approach to ‘subjective rationality’ has been influential in the sociology of organizations (see ORGANIZATION THEORY) because it demonstrated the way in which organizational structure (DIVISION OF LABOUR, SOCIALIZATION, AUTHORITY) and channels of communication limit the range of solutions considered.

bounded rationality

Bounded Rationality

The theory that humans attempt to make rational decisions, but their ability to do so is limited by knowledge, ability to know, inadequate time to consider and other factors. Bounded rationality may explain situations like panic buying, in which investors continue to buy a security long after it ceases to be rational to do so. Investors may believe the price for the security may continue to rise and may not believe they have enough time to find out for certain. Bounded rationality claims people aim for rationality but cannot be reasonable all the time. See also: Behavioral economics.

bounded rationality

limits on the capabilities of people to deal with complexity, process information and pursue rational aims. Bounded rationality prevents parties to a CONTRACT from contemplating or enumerating every contingency that might arise during a TRANSACTION, so preventing them from writing complete contracts.

单词	bounded rationality
释义	bounded rationality bounded rationality a model of human action in which choices are seen as limited and imperfect in terms of knowledge of the situation and expected outcomes; action is therefore never completely rational. The concept originated in the work of March and Simon (1958) and Simon (1957a & b) on DECISION MAKING in organizations. Their work was critical of the model or IDEAL TYPE of perfect rationality presented in economic theories of the firm; in contrast to the assumption of profit maximization in economic theory March and Simon argued that actual behaviour in organizations was SATISFICING rather than ‘optimizing’ in terms of the achievement of goals. This approach to ‘subjective rationality’ has been influential in the sociology of organizations (see ORGANIZATION THEORY) because it demonstrated the way in which organizational structure (DIVISION OF LABOUR, SOCIALIZATION, AUTHORITY) and channels of communication limit the range of solutions considered. bounded rationality Bounded Rationality The theory that humans attempt to make rational decisions, but their ability to do so is limited by knowledge, ability to know, inadequate time to consider and other factors. Bounded rationality may explain situations like panic buying, in which investors continue to buy a security long after it ceases to be rational to do so. Investors may believe the price for the security may continue to rise and may not believe they have enough time to find out for certain. Bounded rationality claims people aim for rationality but cannot be reasonable all the time. See also: Behavioral economics. bounded rationality limits on the capabilities of people to deal with complexity, process information and pursue rational aims. Bounded rationality prevents parties to a CONTRACT from contemplating or enumerating every contingency that might arise during a TRANSACTION, so preventing them from writing complete contracts.
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