Why are we satisfied by “good enough?”

Bounded Rationality

, explained.
Bias

What is bounded rationality?

Bounded rationality is a human decision-making process in which we attempt to satisfice, rather than optimize. In other words, we seek a decision that will be good enough, rather than the best possible decision.

On the left side, labeled "Bounded Rationality," a smiling stick figure chooses between two cans labeled "Mint" and "Berry," saying, "Mmmh, Berry Yummy." On the right side, labeled "Unbounded Rationality," a frustrated stick figure faces the same two cans but is overwhelmed by complex equations and a thought bubble showing a chaotic scene with multiple people.

Where this bias occurs

Imagine you are at the grocery store buying eggs. You look at the various brands and buy a carton of eggs labeled “cage-free.” This decision satisfies your desire to be ethical by choosing eggs from chickens not raised in cages.

However, when we make quick choices based on labels like “cage-free,” we often fail to stop and think about what those terms actually mean. Our decision is based on a false sense of rationality because we do not have all the information available. Maybe we don’t have the time to look up that “cage-free” can mean both “free-run” and “free-range,” but only “free-range” chickens have a chance to go outside.1 Bounded rationality encourages us to make decisions that satisfy a particular criterion, such as being ethical, without making the most optimal choice within that criterion.

Related Biases

Sources

  1. The B.C Society for the Prevention of Cruelty to Animals. (2017, December 2). Food label "fowl" play: The free run chicken myth. BC SPCA. https://spca.bc.ca/news/free-run-chicken-myth
  2. Wheeler, G. (2018, November 30). Bounded rationality (Stanford encyclopedia of philosophy). Stanford Encyclopedia of Philosophy. https://plato.stanford.edu/entries/bounded-rationality/
  3. DeShong, T. (2019, September 12). With his new chicken documentary, is Morgan Spurlock part of the solution and the problem? The Washington Post. https://www.washingtonpost.com/lifestyle/food/with-his-new-chicken-documentary-is-morgan-spurlock-part-of-the-solution-and-the-problem/2019/09/11/39b985d0-cb6e-11e9-a1fe-ca46e8d573c0_story.html
  4. Warshaw, B. (2019, July 17). What’s the difference between free-range, cage-free, and pasture-raised eggs? Eater. https://www.eater.com/2019/7/17/20696498/whats-the-difference-cage-free-free-range-pasture-raised-eggs
  5. Simon, H. A. (1955). A behavioral model of rational choice. The Quarterly Journal of Economics, 69(1), 99-118. https://doi.org/10.2307/1884852
  6. Simon, H. A. (1990). Invariants of human behavior. Annual Review of Psychology, 41(1), 1-20. https://doi.org/10.1146/annurev.ps.41.020190.000245
  7. Gigerenzer, G. (1991). From tools to theories: A heuristic of discovery in cognitive psychology. Psychological Review, 98(2), 254-267. https://doi.org/10.1037/0033-295x.98.2.254
  8. Roehrich, J., Grosvold, J., & Hoejmose, S. U. (2014). Reputational risks and sustainable supply chain management: Decision making under bounded rationality. International Journal of Operations & Production Management, 34(5), 695-719. https://www-emerald-com.ezproxy.library.ubc.ca/insight/content/doi/10.1108/IJOPM-10-2012-0449/full/html
  9. Hausman, J. A. (1979). Individual discount rates and the purchase and utilization of energy-using durables. The Bell Journal of Economics, 10(1), 33-54. https://doi.org/10.2307/3003318
  10. Loewenstein, G., & Thaler, R. H. (1989). Anomalies: Intertemporal choice. Journal of Economic Perspectives, 3(4), 181-193. https://doi.org/10.1257/jep.3.4.181
  11. Blistein, J. (2019, May 24). Is streaming music dangerous to the environment? One researcher is sounding the alarm. Rolling Stone. https://www.rollingstone.com/music/music-features/environmental-impact-streaming-music-835220/

About the Authors

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Dan Pilat

Dan is a Co-Founder and Managing Director at The Decision Lab. He is a bestselling author of Intention - a book he wrote with Wiley on the mindful application of behavioral science in organizations. Dan has a background in organizational decision making, with a BComm in Decision & Information Systems from McGill University. He has worked on enterprise-level behavioral architecture at TD Securities and BMO Capital Markets, where he advised management on the implementation of systems processing billions of dollars per week. Driven by an appetite for the latest in technology, Dan created a course on business intelligence and lectured at McGill University, and has applied behavioral science to topics such as augmented and virtual reality.

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Dr. Sekoul Krastev

Sekoul is a Co-Founder and Managing Director at The Decision Lab. He is a bestselling author of Intention - a book he wrote with Wiley on the mindful application of behavioral science in organizations. A decision scientist with a PhD in Decision Neuroscience from McGill University, Sekoul's work has been featured in peer-reviewed journals and has been presented at conferences around the world. Sekoul previously advised management on innovation and engagement strategy at The Boston Consulting Group as well as on online media strategy at Google. He has a deep interest in the applications of behavioral science to new technology and has published on these topics in places such as the Huffington Post and Strategy & Business.

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