What is the limited rationality?

Limited rationality is the idea that individuals who face decisions must work at certain borders to take these decisions. As regards consumers who decide on the purchase of goods and services, it means that it is necessary to establish a selection of consumers for factors such as available information and the amount of time to decide. The general idea of ​​the limited rationality acknowledges that the available data may or may not be quite accurate or reliable, but that despite the quality of the information, the decision must be made using resources that are currently accessible to the creators of the decision.

with limited rationality is generally acknowledged that the decision is taken with three specific restrictions. First, the information available to the creators of decisions is often only partial and can even be unreliable. This reality means that the decision can be made without knowing one or more alternative courses of the event. Back with restrictions availableThe limits of the human mind also play the role of playing the role. The third factor that affects the outcome of the decision -making process is the amount of time to achieve the decision on the procedure.

Basics of limited rationality can be applied to a number of situations in business operations and also how consumers behave on the market. For example, the decision to launch a new product will be influenced by intelligence that the company is able to gather with the most likely reaction of consumers to this new product. At the same time, the ability of society to understand the nuances of these reactions will affect the exact form of the launch. Finally, the timing of the market will be influenced by how long the owners of the businesses will be that consumers will be attracted to the product in sufficient numbers to allow it to establish space on the market that can be maintained.

with consumers plays the idea of ​​a limited rationality role in deciding which pRoducts to buy and when to buy them. Any number of factors may be involved based on the information. This means that when deciding between two products that are very similar in terms of price and performance, a subjective factor, such as the perception of manufacturers' obligation to environmental problems, may be consumer in one way or another. Here, subjective value theory requires the consumer's ability to evaluate the available data within the limits of your own mind and decide what to do. Costs can also be a factor, especially if the item is offered only at a selling price for a limited period of time.