Bounded rationality deals with the problem of what to do when it is not possible or expedient to obtain a substantively rational solution owing to informational or computational limitations. Sims (1980) has characterized the situation as a research “wilderness.” There are several different notions of bounded rationality, but they tend to follow two distinct streams. The first stream deals with bounds on the resources, such as computational power or time, and the second deals with bounds on the information available to obtain a decision.

Resource-bounded problems deal with the problem of making decisions under severe computational or time constraints. Consideration of such problems has led to the development of procedures that fall under a category termed constrained optimization. Constraints, in this context, do not refer to functional restrictions on the behavior of the decision maker, such as energy limitations or performance requirements. Rather, the constraints of interest here are limitations in the ability of the decision maker to process information and arrive at a solution. Within this subclass of problems, there are multiple approaches.