Bounded Rationality Essay

Abstract page

Most people are limited by something when making their choices. Sometimes it can be a moral constraint, but even more often, it happens that they face a situation of a bounded rationality. In such situations, people cannot make adequate decisions, as they are limited in their knowledge or they have cognitive limitations of their minds. As a result, decisions made are satisfactory, but not optimal. So, when available information or time to make the decision are limited, rationality is limited too. When there are some limitations, people do not make rational choices as they lack resources and abilities to arrive at optimal solutions.
Almost all people were forced to make decisions when there was no adequate information to arrive at the best solution possible. For example, I have faced a situation of a bounded rationality at work and this paper is intended to describe such a situation.

Almost every human being has faced a situation, in which this person faced lack of adequate information to form a well-grounded and reasonable opinion.
In such situations, people usually choose not the best option among all possible variants, but an option that seems to be the most suitable one. It can happen in case someone is not willing to continue his or her search, or there are some limitations of this person's activity. It can be a limit in time or in physical capabilities, a restriction to access certain information, etc.
In addition, it can be a situation when someone lacks control over certain events or operations, and, therefore, this person's opinion or decision will not be based on facts, but rather on assumptions.
It can happen that the person has already taken a certain decision and is not willing to continue the search, even though this decision-making was not conducted properly and till the very end.
All the situations mentioned above can be described in one term: bounded rationality. According to the definition given by the Business Dictionary, bounded rationality means a concept of three kinds of limitations that do not let to make the most effective decision; these limitations are limited information, limited amount of time, and limited capacity of human mind to process all information adequately (BusinessDictionary.com).
However, in this paper I would like to focus on satisficing, limited search, and inadequate information and control as parts of the bounded rationality, which prevent a person from making the most effective decision.
Most of us have faced an occasion of the bounded rationality in our everyday life, either it has been at work or at home. I have once faced this kind of a situation at the Ministry of Communications of Kuwait where I work as an accountant. In that situation, I lacked an adequate information and control over the situation, I had to satisfice, and my search was limited at that point of time. More than that, I was limited in time, and my brain was not able to process all information in the most effective way, as I was already tired.

Description of the situation

It was Thursday, the last working day of the week, and I was finishing my work in the office. Suddenly, I received a phone call from one of my friends who was working in the Ministry of Finance. After usual greetings, she told me that there was a vacant job an accountant in the Ministry of Finance. She was going to apply for this position, but then she changed her mind and decided to stay at her position. She told me some details, but I was rather tired, so I did not pay much attention to what exactly she was saying. However, after she hung up, I realized that this position could be of some interest to me. I thought that I could apply for that position as Ministry of Finance may potentially provide more opportunities for personal and professional development of someone on an accountant's position. However, in case I was chosen for this position, it would mean no promotion for me for now. Therefore, I had to think over this vacancy more thoroughly as it could change the way of my life.

Satisficing

I started thinking whether I do need this job as I already have a similar one and, most probably, there will be no big difference between these two jobs. Then I thought that I should try to find an interesting vacancy I can apply for in some kind of a corporation of a private company. But, if I am really going to quit this job and try to find a new one, I will need to have a raise in my salary and the position should be better than a current one. But then I thought that I have quite a stable and interesting job and I am fully satisfied with it for now. There are no visible risks at the moment that are related to my job, there is a chance to be promoted within a year, I am satisfied with my salary and I like what I usually do at work. This is the reason why I concluded that there is no need to apply for a new vacancy for now if benefits of it are not overwhelming.

Limited search

Anyway, I tried to google this position to find out as much as possible about this position. I was sure that I chose the right key words, but I did not manage to find anything about this open position. Then I decided that there could be a description of this vacancy on the Ministry's website. I found a website of Ministry of Finance, but there was no information available about this vacancy at all.
Thus, I decided to call my friend back and ask her about this position of an accountant. Probably, she was already resting after work, as she did not pick up the phone. I found her in social networks, but she was not online at that time. Unfortunately, I did not know anyone else working in the Ministry of Finance and, therefore, did not have any other choice but to try to find other sources of available information.

Inadequate information

Anyway, I was not going to give up on this vacancy. Thus, I found a similar vacancy on website of the Ministry of Finance, but it was a job of a Financial Planning Analyst. I decided that most probably, positions of an accountant and a financial planning analyst would be the same in terms of the benefits package. This way I would at least know what was the general coverage, life and health insurance, and other insurances. In addition, I could find out how long the vacation is and how many holidays and sick days all employees of Ministry of Finance have. However, there was no guarantee that all the benefits that I found would be the same for a person obtaining a new position of an accountant. Moreover, there was no other source of information so I would be able to compare these benefits and control the situation to make an adequate decision.

Conclusion

It happened that I could not find all necessary information that day and that situation of a bounded rationality prevented me from making an adequate decision whether I should apply for a new position. Most of us face similar situations rather often when something prevents us from making a choice. In such cases, rationality is limited and decisions made are irrational. It happens because people are limited in time, information they possess or they have cognitive limitations of their minds.

References

What is bounded rationality? (n.d.). Retrieved April 1, 2015, from http://www.businessdictionary.com/definition/bounded-rationality.html