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Term

Bounded Rationality - Selection Logic

Rationality under constraints: limited time, information, and cognitive resources.

Aliases: Bounded rationality

Definition

Bounded Rationality: Rationality under constraints: limited time, information, and cognitive resources.

1. Mechanism (why it happens)

Bounded rationality emphasizes that decision-makers operate under limited information, time, and cognition; therefore, procedures and heuristics become central. It shifts “rationality–from perfect optimization to feasible decision processes.[^1]

2. Classic experiments / evidence

2.1 Foundational theory (Simon, 1955)

  • Design: Formal behavioral model of rational choice under constraints.[^1]
  • Manipulation: Not a lab manipulation; theoretical model motivated by realistic constraints.[^1]
  • Key finding: Optimization is often infeasible; satisficing and procedural rationality are necessary.[^1]
  • Notes/limitations: Foundational for modern decision science and consumer decision frameworks.

2.2 Adaptive strategy selection (Payne, Bettman & Johnson, 1993)

  • Design: Decision tasks showing strategy shifts under time pressure, complexity, and goal changes.[^2]
  • Manipulation: Constraint changes (time pressure, task complexity).[^2]
  • Key finding: People adapt decision strategies to constraints rather than applying a single optimal algorithm.[^2]
  • Notes/limitations: Empirical support for constraint-dependent procedures.

3. Consumer decision patterns

  • Consumers use heuristics when stakes are low.
  • Under high overload, they rely on single cues (brand, price).
  • Decision quality improves with better procedures, not just more information.

4. How marketing leverages it

Markets often increase complexity and overload to push heuristic choice (brand, social proof). Bounded rationality makes process design and consumer immunity valuable.[^3]

5. Mitigation (Selection Logic)

  1. Allocate cognitive budget by stakes and reversibility (T2).
  2. Use explicit criteria and weights (M2).
  3. Validate outcomes to improve procedures (M5).

References

  1. Simon, H. A. (1955). A behavioral model of rational choice. Quarterly Journal of Economics, 69(1), 99–18.[source]
  2. Payne, J. W., Bettman, J. R., & Johnson, E. J. (1993). The Adaptive Decision Maker. Cambridge University Press.[source]
  3. Kahneman, D. (2011). Thinking, Fast and Slow. Farrar, Straus and Giroux.[source]

Further Reading