The theory of “bounded rationality”

The theory of “bounded rationality” says that, though we often act on incomplete information, and possibly inaccurate or false assumptions, we are still “rational.”  That is, we make the best decisions we can based on:

  • Our values, assumptions, and interests
  • Our beliefs about the values, assumptions, and interests of the people we are dealing with
  • Our beliefs about the context—what we think is “going on” in the present moment, and what the events of that present moment might mean for the future

Think of the three bullets above as being the “premises” of our decisions.  Herbert Simon (1945) believed that the most efficient way to get people to change their behavior was to change their premises (since people are assumed to be rational).  So, suppose you are a new supervisor of a work group that is performing well below the collective capabilities of its members.  How would you use the theory of bounded rationality to get them to improve their performance? In other words, how would you make it rational for them to increase their supply of productive effort?

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Justify your answer by citing the class text, the lectures, or by your own research.


Simon, Herbert A. (1945). Administrative behavior.  New York: The Free Press.



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