AN ARTICLE ON LIMITED OR BOUNDED RATIONALITY IN DECISION MAKING

By Daniel R. Ogidiagba MSc.

Decision making is defined as the selection of a course of action from among alternatives. 
Decision making is at the central of planning (core of planning). A plan cannot be said to exist unless a decision –commitment of resources, direction or reputation has been made.

It is therefore pertinent to note that decision making is, however, only a step in planning.
Even when it is done rapidly and with the least minute thought or when it influences action for only a few minutes, it is a part of planning. It is also a part of everyone’s daily life.

It is expected of a manager to take rational decisions, but a manager must on the other hand, settle for limited or bounded rationality.
Even if a manager tries with a fixed determination to be completely rational, he must on the other hand settle for limited or bounded rationality.

In other words, limitations of Information, Time, and Certainty inhibit rationality. Since managers cannot be completely rational in practice, they sometimes allow their dislike of risk, their desire to play safe to interfere with the desire to reach the best solution under the circumstances. Herbert Simon called this satisficing, that is, picking a course of action that is satisfactory or good enough under circumstances.

In spite of the fact that managerial decisions are made with a desire to scale through as safely as possible, most managers do attempt to make the best satisficing decisions that they can within the limits of rationality and in light of the degree and nature of the risks involved.