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How to Decide How to Decide How to. . . : Modeling Limited Rationality

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Lipman, Barton L

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Abstract

It seems inconsistent to model boundedly rational action choice by assuming that the agent chooses the optimal decision procedure. This criticism is not avoided by assuming that he chooses the optimal procedure to choose a procedure to . . . to choose an action. The author shows that, properly interpreted, this regress, continued transfinitely, generates a model representing the agent's perception of all his options, including every way to refine his perceptions. In this model, the agent surely must choose the perceived best option. Hence, it is not inconsistent to model limited rationality by assuming that the agent uses the "optimal" decision procedure. Copyright 1991 by The Econometric Society.

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Publisher Info
Article provided by Econometric Society in its journal Econometrica.

Volume (Year): 59 (1991)
Issue (Month): 4 (July)
Pages: 1105-25
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Handle: RePEc:ecm:emetrp:v:59:y:1991:i:4:p:1105-25

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  1. J. Barkley Rosser, Jr., 2003. "A Nobel Prize for Asymmetric Information: the economic contributions of George Akerlof, Michael Spence and Joseph Stiglitz," Review of Political Economy, Taylor and Francis Journals, vol. 15(1), pages 3-21, January. [Downloadable!] (restricted)
  2. Matsushima, Hitoshi, 1997. "Bounded Rationality in Economics: A Game Theorist's View," CIRJE F-Series 97-F-10, CIRJE, Faculty of Economics, University of Tokyo. [Downloadable!]
  3. Xavier Gabaix & David Laibson & Guillermo Moloche & Stephen Weinberg, 2006. "Costly Information Acquisition: Experimental Analysis of a Boundedly Rational Model," American Economic Review, American Economic Association, vol. 96(4), pages 1043-1068, September. [Downloadable!]
  4. Itzhak Gilboa, 1991. "Rationality and Ascriptive Science," Discussion Papers 943, Northwestern University, Center for Mathematical Studies in Economics and Management Science. [Downloadable!]
  5. Kislaya Prasad, . "Choice Under Uncertainty with Costly Computations," Computing in Economics and Finance 1997 153, Society for Computational Economics. [Downloadable!]
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  6. spyros vassilakis, 2002. "some economic applications of scott domains," Game Theory and Information 0207002, EconWPA. [Downloadable!]
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  7. Markus Pasche, 2002. "Playing Fair: Rationality and Norm-guided Behavior in Games," Working Paper Series B 2002-02, Friedrich-Schiller-Universität Jena, Wirtschaftswissenschaftliche Fakultïät. [Downloadable!]
  8. Hagen Lindstädt, 2007. "Valuing Others’ Information under Imperfect Expectations," Theory and Decision, Springer, vol. 62(4), pages 335-353, May. [Downloadable!] (restricted)
  9. Markus Pasche, 2001. "Equilibrium Concepts for Boundedly Rational Behavior in Games," Working Paper Series B 2001-03, Friedrich-Schiller-Universität Jena, Wirtschaftswissenschaftliche Fakultïät. [Downloadable!]
  10. W. Bentley MacLeod, 2002. "Complexity, Bounded Rationality and Heuristic Search," The B.E. Journal of Economic Analysis & Policy, Berkeley Electronic Press, vol. 0(1). [Downloadable!]
  11. Kumabe, Masahiro & Mihara, H. Reiju, 2008. "Preference aggregation theory without acyclicity: The core without majority dissatisfaction," MPRA Paper 11728, University Library of Munich, Germany. [Downloadable!]
  12. Jonathan Bendor & Dilip Mookherjee & Debraj Ray, 2001. "Reinforcement Learning in Repeated Interaction Games," The B.E. Journal of Theoretical Economics, Berkeley Electronic Press, vol. 0(1). [Downloadable!]
  13. Markus Pasche, 2002. "Heterogeneous Behavioral Rules in the Oligopolistic Case," Working Paper Series B 2002-01, Friedrich-Schiller-Universität Jena, Wirtschaftswissenschaftliche Fakultïät. [Downloadable!]
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