Bounded rationality is the idea that rationality is limited when individuals make decisions, and under these limitations, rational individuals will select a decision that is satisfactory rather than optimal.

Limitations include the difficulty of the problem requiring a decision, the cognitive capability of the mind, and the time available to make the decision. Decision-makers, in this view, act as satisficers, seeking a satisfactory solution, with everything that they have at the moment rather than an optimal solution. Therefore, humans do not undertake a full cost-benefit analysis to determine the optimal decision, but rather, choose an option that fulfils their adequacy criteria. An example of this being within organisations when they must adhere to the operating conditions of their company, this has the opportunity to result in bounded rationality as the organisation is not able to choose the optimal option.

Some models of human behavior in the social sciences assume that humans can be reasonably approximated or described as "rational" entities, as in rational choice theory or Downs' political agency model. The concept of bounded rationality complements "rationality as optimization", which views decision-making as a fully rational process of finding an optimal choice given the information available. Therefore, bounded rationality can be said to address the discrepancy between the assumed perfect rationality of human behaviour (which is utilised by other economics theories such as the Neoclassical approach), and the reality of human cognition. In short, bounded rationality revises notions of "perfect" rationality to account for the fact that perfectly rational decisions are often not feasible in practice because of the intractability of natural decision problems and the finite computational resources available for making them. The concept of bounded rationality continues to influence (and be debated in) different disciplines, including political science, economics, psychology, law and cognitive science.