Sample Management Essay Summary on Bounded Rationality

Bounded Rationality

Herbert Simon first introduced the concept of bounded rationality as an alternative mathematical model for decision making. The concept states that the decision making process is limited by the availability of information to the decision maker, limitations of cognition and the time available for decision making (Daft, 2010). Alternatively, the concept of bounded rationality can be defined as resource constraints and the ability to make decisions that result in the most optimal solutions. The model uses constraints and tradeoffs and is used in confronting decisions that are not programmed though which use the concept. The constraints in resources and the tradeoffs observed through the bounded rationality model may include aspects such as personal constraints, decisions and organizational constraints. Similarly, the organizational constraints include business agreements, the corporate culture and the common interests among others.

Managers often face complex challenges that may require immediate decision making within a limited time and resource availability in order to achieve the optimal solution. The bounded rationality concept plays a significant role in decision making under such conditions. In the rational decision making by managers, the bounded rationality concept enables mangers to make intuition based decisions. In this way, decisions are based on experiences and judgments rather than on logical reasoning hence the process is speeded up. Some managers for instance, may make the decisions based on their long term experience within the company in which they need to make decisions. This means that the decisions are made faster than when other models are used. The model also enables decision makers to be innovative in problem solving.




Daft, R. (2010). Organization theory and design. Mason, Ohio: South-Western Cengage Learning.


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