What does the theory of bounded rationality suggest about decision-making?

The theory of bounded rationality, proposed by Herbert Simon, posits that individuals make decisions within the constraints of limited information and the cognitive limitations of their minds. This means that rather than being able to evaluate all possible outcomes and making perfectly rational decisions based on complete and exhaustive information, people often rely on simplified models of reality to make decisions. Due to these cognitive constraints, individuals must work with available information and may use heuristics—mental shortcuts—to make choices that are satisfactory rather than optimal.

This understanding highlights the reality of human decision-making processes, which are influenced by factors such as the complexity of the environment, the time available for making a decision, cognitive biases, and emotional influences. By recognizing that decision-making is not always about finding the best possible option but instead making a choice that is "good enough" given the circumstances, the theory of bounded rationality provides a more realistic view of how individuals function when navigating choices in everyday life.