To determine whether rationality assumption or assumption of bounded rationality applies in the following situation.
Sebastian is a financial analyst who is convinced that his clients do not always make choices that are consistent with their long-term objectives. He has also determined that his clients do not consider relevant choice and often fail to act in their own self-interest.
Concept Introduction:
Rationality assumption: The rationality is considered as the heart of the economics. It says that individuals choose the best decision for them with the available information. The rationality assumption assumes that individuals don’t intentionally make decisions that make them worse off. That is to say they make decisions normally.
Bounded rationality: The concept of bounded rationality says that people are mostly but not completely rational, Bounded rationality also assumes that people as rational but that is limited by the information they have and their ability to quickly process the available information.
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