Describe the 'bounded rationality' concept and provide an example of how it might affect a manager's decision-making process.

"Bounded Rationality" is a concept in decision making theory that was developed by Herbert Simon. It suggests that individuals are only partly rational and are limited by the information they have, the cognitive limitations of their minds, and the finite amount of time they have to make decisions.

In other words, it acknowledges that human decision-making processes are not always perfectly rational or purely logic-driven due to constraints such as limited information, time, and cognitive processing ability. Instead, people often make satisfactory decisions that may not be optimal.

For example, in a managerial context, a manager may need to decide on a new supplier for a key component of their product. In an ideal world, the manager would analyze all possible suppliers, considering factors such as cost, quality, reliability, and delivery times. However, due to bounded rationality, the manager may not have the time or resources to thoroughly evaluate every potential supplier.

Instead, they might choose to consider only a subset of suppliers, perhaps those they have used before or those recommended by trusted colleagues. They might then make a decision based on this limited information, choosing a supplier that seems 'good enough', rather than spending more time to potentially find the optimal choice. This is an example of 'satisficing', a decision-making strategy that is often used under conditions of bounded rationality.