Explain bounded rationality and how it affects decision quality in organizations.

• A. Bounded rationality means decision makers rationally simplify decisions due to limits on time, information, and cognitive capacity; can lead to satisficing rather than optimizing.
• B. Bounded rationality means decisions are always optimal.
• C. Bounded rationality means there are no limits to information.
• D. Bounded rationality means organizations ignore goals.

Answer: (A)

Bounded rationality is the idea that people try to make good enough decisions, but they’re limited by time, information, and their own cognitive capacity. Because of these limits, decision makers don’t plot every possible alternative and weigh every outcome; they simplify the problem and search for a solution that is satisfactory rather than optimal. In organizations, this leads to decision quality that balances speed and effort against the potential for the absolute best outcome. Decisions are made quickly using rules of thumb, past experience, or standard procedures, which helps things move forward but can also miss better options or trade-offs if important information is overlooked or the situation is more complex than anticipated. So, the best answer captures that rational simplification arises from limits and that it often results in satisficing rather than optimizing. The other ideas—that decisions are always optimal, that information has no limits, or that organizations ignore goals—do not align with how bounded rationality actually operates.