UGM June 2019 Q8
- Option : B
- Explanation : Although a manager may try to be completely rational, yet the limitations of the availability of information, resources, intellect, and time influence his/her rationality. In the 1950s, Herbert Simon, an economist, propounded the concept of ‘bounded rationality’, which suggests that managers may not always be perfectly rational in their decision-making. Simon argued that managers, instead of
searching for the perfect or ideal decision, frequently settle for an alternative that will adequately serve their purpose. Simon termed this phenomenon as ‘satisficing’, which actually means that managers continue to search alternatives until they identify one an alternative that looks satisfactory or good enough under the given circumstances.
The satisficing approach can be considered appropriate when the cost of searching for a better alternative or delaying a decision exceeds the potential gain that is likely to happen by adopting the effort to search for the best alternative. This behavior of a manager can best be described as limited rationality. A manager does not maximize the outcome of a decision by searching for all the possible alternatives and then choosing the best amongst them.
