Economics Bounded Rationality Questions
The implications of bounded rationality for behavioral decision theory are that individuals do not always make fully rational decisions due to cognitive limitations and constraints. Instead, they rely on heuristics, or mental shortcuts, to simplify decision-making processes. This can lead to biases and errors in judgment. Additionally, bounded rationality suggests that individuals may not always have access to complete information or have the ability to process and analyze all available information. As a result, behavioral decision theory recognizes that decision-making is often influenced by emotions, social factors, and other non-rational considerations.