Bounded rationality is a concept proposed by Herbert Simon that challenges the notion of human rationality as implied by the concept of homo economicus. Rationality is bounded because there are limits to our thinking capacity, available information, and time (Simon, 1982). Bounded rationality is similar to the social-psychological concept that describes people as “cognitive misers” (Fiske & Taylor, 1991) and represents a fundamental idea about human psychology that underlies behavioral economics. (See also satisficing.)
Fiske, S. T., & Taylor, S. E. (1991). Social Cognition (2nd ed.). New York: McGraw-Hill.
Simon, H. A. (1982). Models of bounded rationality. Cambridge, MA: MIT Press.