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

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  • Lipman, Barton L

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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Bibliographic 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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Cited by:
  1. Patrick Bolton & Antoine Faure-Grimaud, 2009. "Thinking Ahead: The Decision Problem," Review of Economic Studies, Oxford University Press, vol. 76(4), pages 1205-1238.
  2. Markus Pasche, 2001. "Equilibrium Concepts for Boundedly Rational Behavior in Games," Working Paper Series B 2001-03, Friedrich-Schiller-Universität Jena, Wirtschaftswissenschaftliche Fakultïät.
  3. Markus Pasche, 2002. "Heterogeneous Behavioral Rules in the Oligopolistic Case," Working Paper Series B 2002-01, Friedrich-Schiller-Universität Jena, Wirtschaftswissenschaftliche Fakultïät.
  4. J. Barkley Rosser, 2003. "A Nobel Prize for Asymmetric Information: The economic contributions of George Akerlof, Michael Spence and Joseph Stiglitz," Review of Political Economy, Taylor & Francis Journals, vol. 15(1), pages 3-21.
  5. Markus Pasche, 2002. "Playing Fair: Rationality and Norm-guided Behavior in Games," Working Paper Series B 2002-02, Friedrich-Schiller-Universität Jena, Wirtschaftswissenschaftliche Fakultïät.
  6. Vriend, Nicolaas J., 1996. "Rational behavior and economic theory," Journal of Economic Behavior & Organization, Elsevier, vol. 29(2), pages 263-285, March.
  7. Vassilakis, Spyros, 1992. "Some economic applications of Scott domains," Mathematical Social Sciences, Elsevier, vol. 24(2-3), pages 173-208, November.
  8. Mongin, Philippe, 1998. "Does optimization imply rationality?," MPRA Paper 37740, University Library of Munich, Germany.
  9. Tohme, Fernando, 2005. "Existence and definability of states of the world," Mathematical Social Sciences, Elsevier, vol. 49(1), pages 81-100, January.
  10. Itzhak Gilboa, 1991. "Rationality and Ascriptive Science," Discussion Papers 943, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  11. Kumabe, Masahiro & Mihara, H. Reiju, 2011. "Preference aggregation theory without acyclicity: The core without majority dissatisfaction," Games and Economic Behavior, Elsevier, vol. 72(1), pages 187-201, May.
  12. Herbert Hax, 2003. "Thünen-Vorlesung: Unternehmensführung und ökonomische Rationalität," Perspektiven der Wirtschaftspolitik, Verein für Socialpolitik, vol. 4(3), pages 295-312, 08.
  13. Hagen Lindstädt, 2007. "Valuing Others’ Information under Imperfect Expectations," Theory and Decision, Springer, vol. 62(4), pages 335-353, May.
  14. Kislaya Prasad, . "Choice Under Uncertainty with Costly Computations," Computing in Economics and Finance 1997 153, Society for Computational Economics.
  15. 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.
  16. Conlisk, John, 1996. "Bounded rationality and market fluctuations," Journal of Economic Behavior & Organization, Elsevier, vol. 29(2), pages 233-250, March.
  17. J. Barkley Rosser, Jr., 2001. "Alternative Keynesian and Post Keynesian Perspectives on Uncertainty and Expectations," Journal of Post Keynesian Economics, M.E. Sharpe, Inc., vol. 23(4), pages 545-566, July.
  18. J. Atsu Amegashie, 2005. "Signaling In A Dynamic Contest With Boundedly Rational Players," Working Papers 0510, University of Guelph, Department of Economics and Finance.

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