Artificial Intelligence Programming Practice Exam 2025 - Free AI Programming Practice Questions and Study Guide

Bounded rationality refers to the idea that in decision-making, individuals are limited by the information they have, the cognitive capabilities they possess, and the finite amount of time they have to make a choice. This concept, introduced by Herbert Simon, acknowledges that while people strive to make rational decisions, their ability to do so is constrained by various factors, such as incomplete information, uncertainty about future outcomes, and the limits of human cognition.

In this context, rational decision-making is not about achieving the optimal choice but rather making the best possible decision within the constraints of these limitations. Individuals often use heuristics or rules of thumb to simplify the process, leading to satisfactory rather than optimal solutions. This understanding is critical in fields such as economics, psychology, and artificial intelligence, particularly when modeling human decision-making processes and designing systems that align with human reasoning capabilities.

The other concepts mentioned do not accurately capture the essence of bounded rationality. Unlimited access to information does not align with the bounded nature of rationality. The idea that all decisions are irrational contradicts the notion that individuals can still make rational choices, albeit imperfectly. Lastly, the irrelevance of time in decision-making overlooks one of the critical constraints that individuals face when making decisions, as time pressure often