How does bounded rationality challenge the idea that people always make fully informed decisions?

Bounded rationality challenges the assumption that individuals always make fully informed, optimal decisions by highlighting the inherent limitations of human cognition and the environment. While traditional rational choice theory assumes agents possess perfect information and evaluate all possible alternatives to maximize outcomes, bounded rationality recognizes that such an ideal is often unattainable.1234

This challenge is grounded in several key observations:

• Imperfect Information: Individuals never possess perfect information; gathering data is costly and difficult, meaning decisions are inevitably based on incomplete knowledge.2
• Cognitive Constraints: Human reasoning capacities are limited. Rather than performing exhaustive calculations, people often rely on heuristics—mental shortcuts or "rules of thumb"—to reach decisions quickly with less effort.13
• Satisficing: Instead of seeking the single best alternative, individuals typically choose the first option that meets their minimum criteria for success, a process termed "satisficing" by Herbert A. Simon.123

Consequently, bounded rationality suggests that human behavior is often "procedurally rational"—resulting from an appropriate process of deliberation—rather than substantively optimal.1