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Bounded Rationality and Budgeting

Author

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  • Mukdad Ibrahim

    (School of Business, American University of Ras Al Khaimah, United Arab Emirates)

Abstract

This article discusses the theory of bounded rationality which had been introduced by Herbert Simon in the 1950s. Simon introduced the notion of bounded rationality stating that while decision-makers strive for rationality, they are limited by the effect of the environment, their information process capacity and by the constraints on their information storage and retrieval capabilities. Moreover, this article tries to specifically blend this notion into budgeting, using the foundations of incremental theory introduced by Charles Lindblom by the end of 1950s. The end of discussion shows that the use of intended rationality on public sector organizations will be through of implementing of incremental theory’s rules and procedures.

Suggested Citation

  • Mukdad Ibrahim, 2016. "Bounded Rationality and Budgeting," International Review of Management and Marketing, Econjournals, vol. 6(4), pages 755-760.
    • Handle: RePEc:eco:journ3:2016-04-15
    as

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    References listed on IDEAS

    as
    1. John Conlisk, 1996. "Why Bounded Rationality?," Journal of Economic Literature, American Economic Association, vol. 34(2), pages 669-700, June.
    2. Padgett, John F., 1980. "Bounded Rationality in Budgetary Research," American Political Science Review, Cambridge University Press, vol. 74(2), pages 354-372, June.
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    More about this item

    Keywords

    Bounded Rationality; Budgeting; Incremental Budgeting;
    All these keywords.

    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation
    • H61 - Public Economics - - National Budget, Deficit, and Debt - - - Budget; Budget Systems

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