Economics Bounded Rationality Questions
Bounded rationality and bounded awareness are closely related concepts in the field of economics. Bounded rationality refers to the idea that individuals have limited cognitive abilities and information processing capabilities, which leads them to make decisions that are not always fully rational or optimal. It recognizes that individuals often rely on heuristics and simplifications to make decisions due to time constraints and cognitive limitations.
On the other hand, bounded awareness refers to the idea that individuals have limited attention and are not always aware of all the relevant information or alternatives available to them when making decisions. This limited awareness can result from information overload, cognitive biases, or simply not having enough time or resources to gather and process all the necessary information.
In essence, bounded rationality and bounded awareness both acknowledge the limitations of human decision-making. Bounded rationality focuses on the cognitive limitations of individuals, while bounded awareness emphasizes the limited attention and awareness individuals have when making decisions. Both concepts highlight the importance of understanding and accounting for these limitations when analyzing economic behavior and decision-making processes.