Departmentalizing decisions increases the risk of leading to a poor decision.

Bounded Rationality

Explanation:

To begin with, it is essential to understand the concept of departmentalization.

Departmentalization centers on the idea that departments/divisions within an organization are grouped and/or sectioned, using some identified benchmarks. In extension, Departmentalizing, is simply the acts of engaging in departmentalization.

Bounded rationality, is a phenomenon that states that human reasoning and extension, logic could be threatened by a number of constraints. The constraints here could be human, material and physical resources. The implication is that an individual is not in possession of full details and information that could influence or shape his position.

Hence, by departmentalizing, an organization has placed a constraint on the amount of information accessible to that department, under the bigger context of an organization. Thus, the departments' rationality has been bounded and this could ultimately spiral into poor decision making, principally because of lack of detailed information.

Bounded rationality

Explanation:

Bounded rationality is a situation where a manager is satisfied with limited information available at his disposal , which leads to a poor decision making.

Departmentalizing is a process where a business is broken down into sub division based on the various tasks being carried out , with each of this division headed by a manager.

In such a situation , the managers might not be exposed to every information required or even have a cognitive limitation mindset, Decisions made in such a situation will definitely no be the best

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answer; no individual buyer or seller has any significant impact on the market price;