What is bounded rationality?

Bounded rationality is a behavioural economics theory which suggests the cognitive, decision-making capacity of humans can't be fully rational due to a number of limits we face. This contrasts with traditional economic theory that suggests humans are rational decision makers, looking to achieve maximum utility. The limits humans face when making decisions include: Time - the amount of time we have to make decisions. Limits of the human brain - to process information and consider every possible decision. Imperfect knowledge (information failure) - the lack of perfect information - we don't have all the reliable information to make fully informed decisions.

Answered by Natalie K. Economics tutor

2048 Views

See similar Economics A Level tutors

Related Economics A Level answers

All answers ▸

Describe how diminishing marginal returns affect a firm's average cost.


Explain the possible causes of deflation in an economy. (15 Marks)


Choose an example of a demerit good and and a policy which may be used by the UK Government to help reduce its consumption


What is opportunity cost?


We're here to help

contact us iconContact usWhatsapp logoMessage us on Whatsapptelephone icon+44 (0) 203 773 6020
Facebook logoInstagram logoLinkedIn logo

© MyTutorWeb Ltd 2013–2025

Terms & Conditions|Privacy Policy
Cookie Preferences