Bounded Rationality and Organizations

Abstract

From a behavioral standpoint, a decision is the result of the adaptation of an individual to the constraints imposed by both the external environment and the limits of rationality (inner environment). This chapter presents the theoretical framework for our behavioral analysis of rational decisions within organizations. This framework will be outlined through two different levels of analysis. First, the general features of the inner environment of a decision—i.e., the psychological aspects regarding rationality in human mind. Second, the external environment of a decision—i.e., the outer shape of means and ends, provided generally by the organization.