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 a core assumption of the “natural assessments” view of heuristics and dual-system models of thinking (Gilovich et al., 2002), and it is one of the psychological foundations of behavioral economics. (See also satisficing and fast and frugal.)
Gilovich, T., Griffin, D., & Kahneman, D. (Eds.). (2002). Heuristics and biases: The psychology of intuitive judgment. Cambridge, UK: Cambridge University Press.
Simon, H. A. (1982). Models of bounded rationality. Cambridge, MA: MIT Press.