Economics Bounded Rationality Questions
Bounded rationality influences the study of industrial organization by recognizing that individuals and firms have limited cognitive abilities and information processing capabilities. This means that decision-making in the industrial setting is often based on simplified models and heuristics rather than perfect rationality. Bounded rationality acknowledges that individuals and firms make decisions that are satisfactory rather than optimal, considering the constraints they face. Therefore, the study of industrial organization takes into account the impact of bounded rationality on market behavior, competition, and firm strategies.