Question

Compare rational and boundedly rational responses to a scenario of your choosing. Provide an example of a decision to be made. The decision can be anything you wish, workplace or non-workplace-related. Then explain what that decision process would look like if one were to follow the rational decision-making model. Then explain what that might look like if one were to follow a bounded rationality model. What are the main differences between these two approaches?

Answer 1

I have choosen a non-work situation, suppose I have to buy Shoe for myself, see below how my decision will differ in each of the situations such as when I will make decision by using Rational decision making and when I will make decision by using Bounded rationality

• In rational decision making when I will buy shoes for my-self, I will do careful analysis of situation, such as what is foot size, what are shops available in the market, who would be offer the best shoes, I will than go and try various alternatives and choose one shoes which will best fit my foot.
• In Bounded rationality situation we do decision basis the limited information. This behavior would be considered boundedly rational if the shoes being purchased were needed for a wedding this afternoon and if a perfectly fitting pair could be obtained for certain only by visiting each of 10 geographically dispersed shoe shops. In this instance, thinking of the decision maker simply as an optimizer of comfort would lead to puzzlement at his selection, but the purchase of poorly fitting shoes looks reasonable enough when the consumer’s limited knowledge of the retail environment is considered.

The main difference between rational decision making and Bounded rationality situation is how we approach to the situation, in ration decision making system a multi-step process for making choices between alternatives is followed however in bounded rationality decision-making rationality of individuals is limited by the information they have, the cognitive limitations of their minds, and the finite amount of time they have to make a decision.