Background and motivation was coined by Herbert A. Simon, where it was proposed as an alternative basis for the mathematical and neoclassical economic modelling of decision-making, as used in economics, political science, and related disciplines. Many economics models assume that agents are on average rational, and can in large quantities be approximated to act according to their preferences in order to maximise utility. With bounded rationality, Simon's goal was "to replace the global rationality of economic man with a kind of rational behavior that is compatible with the access to information and the computational capacities that are actually possessed by organisms, including man, in the kinds of environments in which such organisms exist." Soon after the term bounded rationality appeared, studies in the topic area began examining the issue in depth. A study completed by Allais in 1953 began to generate ideas of the irrationality of decision making as he found that given preferences, individuals will not always choose the most rational decision and therefore the concept of rationality was not always reliable in economic predictions.Schiliró, D. (2013). Bounded Rationality: Psychology, Economics and the Financial Crises. Theoretical and Practical Research in Economic Fields, 4(1(7)), 97-108.
Background and motivation was coined by Herbert A. Simon, where it was proposed as an alternative basis for the mathematical and neoclassical economic modelling of decision-making, as used in economics, political science, and related disciplines. Many economics models assume that agents are on average rational, and can in large quantities be approximated to act according to their preferences in order to maximise utility. With bounded rationality, Simon's goal was "to replace the global rationality of economic man with a kind of rational behavior that is compatible with the access to information and the computational capacities that are actually possessed by organisms, including man, in the kinds of environments in which such organisms exist." Soon after the term bounded rationality appeared, studies in the topic area began examining the issue in depth. A study completed by Allais in 1953 began to generate ideas of the irrationality of decision making as he found that given preferences, individuals will not always choose the most rational de!cision and therefore the concept of rationality was not always reliable in economic predictions.Schiliró, D. (2013). Bounded Rationality: Psychology, Economics and the Financial Crises. Theoretical and Practical Research in Economic Fields, 4(1(7)), 97-108.