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

A man in a blue, striped shirt smiles while standing indoors, surrounded by green plants and modern office decor.

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.

A smiling man stands in an office, wearing a dark blazer and black shirt, with plants and glass-walled rooms in the background.

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.

About us

We are the leading applied research & innovation consultancy

Our insights are leveraged by the most ambitious organizations

Image

“

I was blown away with their application and translation of behavioral science into practice. They took a very complex ecosystem and created a series of interventions using an innovative mix of the latest research and creative client co-creation. I was so impressed at the final product they created, which was hugely comprehensive despite the large scope of the client being of the world's most far-reaching and best known consumer brands. I'm excited to see what we can create together in the future.

Heather McKee

BEHAVIORAL SCIENTIST

GLOBAL COFFEEHOUSE CHAIN PROJECT

OUR CLIENT SUCCESS

$0M

Annual Revenue Increase

By launching a behavioral science practice at the core of the organization, we helped one of the largest insurers in North America realize $30M increase in annual revenue.

0%

Increase in Monthly Users

By redesigning North America's first national digital platform for mental health, we achieved a 52% lift in monthly users and an 83% improvement on clinical assessment.

0%

Reduction In Design Time

By designing a new process and getting buy-in from the C-Suite team, we helped one of the largest smartphone manufacturers in the world reduce software design time by 75%.

0%

Reduction in Client Drop-Off

By implementing targeted nudges based on proactive interventions, we reduced drop-off rates for 450,000 clients belonging to USA's oldest debt consolidation organizations by 46%

Let's chat

Read Next

Einstellung Effect

Why do our past experiences prevent us from reaching the best possible outcome?

Why do our past experiences prevent us from reaching the best possible outcome?

Learn More

Optimism Bias

Why do we overestimate the probability of success?

Why do we overestimate the probability of success?

Learn More

Spotlight Effect

Why do we feel like we stand out more than we really do?

Why do we feel like we stand out more than we really do?

Learn More
See All
Notes illustration

Eager to learn about how behavioral science can help your organization?

Contact us