How does bounded rationality relate to the concept of rational choice theory?

Bounded rationality is a concept that challenges the assumptions of rational choice theory. Rational choice theory assumes that individuals have unlimited cognitive abilities and can make decisions that maximize their utility by considering all available information and alternatives. However, bounded rationality suggests that individuals have limited cognitive abilities, time, and information, which restricts their ability to make fully rational decisions.

Bounded rationality recognizes that individuals often make decisions based on simplified models, rules of thumb, or heuristics, rather than considering all available information. These decision-making shortcuts help individuals cope with the complexity of the real world and make decisions that are "good enough" rather than optimal.

In this context, bounded rationality relates to the concept of rational choice theory by acknowledging that individuals' decision-making processes are not always fully rational. Bounded rationality recognizes that individuals face cognitive limitations and must make decisions under conditions of uncertainty and incomplete information. It suggests that individuals strive to make the best decisions possible given their cognitive constraints, rather than always making fully rational choices.

Overall, bounded rationality challenges the assumptions of rational choice theory by acknowledging the limitations of human cognition and decision-making processes. It provides a more realistic framework for understanding how individuals make choices in the real world.