When a decision maker chooses an alternative under perfect rationality, she___________ her decision, whereas under bounded rationality she chooses a___________ decision.
A) maximizes; minimizing
B) minimizes; satisficing
C) satisfices; maximizing
D) maximizes; satisficing

Question

Quizplus · Accepted Answer

Under perfect rationality, the decision maker would choose the alternative that maximizes their objective function. This means that they consider all possible alternatives and choose the one that offers the highest level of satisfaction or benefits. In contrast, under bounded rationality, the decision maker is limited by incomplete information, cognitive limitations, and time constraints. As a result, they may not be able to consider all possible alternatives and may settle for a satisfactory or good enough option, which is called satisficing. Therefore, the decision maker would maximize their decision under perfect rationality, whereas they would satisfice (i.e., choose a satisfactory decision) under bounded rationality. The only option that captures this distinction is D, which states that the decision maker maximizes under perfect rationality and satisfices under bounded rationality.

When a Decision Maker Chooses an Alternative Under Perfect Rationality