Bounded Rationality and Small Worlds
AbstractWe consider conditions under which the representation of the world available to a boundedly rational decision-maker, whose awareness in- creases over time, constitutes an adequate `small world' (in the sense of Savage 1954) for the assessment of a given decision. Equivalently, we consider whether boundedly rational decision-makers who gradu- ally become aware of all relevant contingencies, can pursue a strategy that is sequentially consistent. We derive conditions on beliefs and preferences that yield a separation between the set of propositions of which the boundedly rational decision-maker is aware and those of which she is unaware and show that these conditions are sufficient to ensure sequential consistency.
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Bibliographic InfoPaper provided by University of Queensland, School of Economics in its series Risk and Sustainable Management Group Working Papers with number 151187.
Date of creation: 09 Jun 2008
Date of revision:
Risk and Uncertainty; D80; D82;
Other versions of this item:
- D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
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- Heifetz, Aviad & Meier, Martin & Schipper, Burkhard C., 2005.
Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems
52, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
- Simon Grant & John Quiggin, 2013.
"Inductive reasoning about unawareness,"
Springer, vol. 54(3), pages 717-755, November.
- Simon Grant & John Quiggin, 2009. "Inductive reasoning about unawareness," Risk & Uncertainty Working Papers WPR09_1, Risk and Sustainable Management Group, University of Queensland.
- Grant, Simon & Quiggin, John, 2009. "Inductive Reasoning About Unwareness," Risk and Sustainable Management Group Working Papers 151188, University of Queensland, School of Economics.
- Grant, Simon & Quiggin, John, 2012. "Inductive Reasoning About Unwareness," Risk and Sustainable Management Group Working Papers 151202, University of Queensland, School of Economics.
- Burkhard Schipper, 2010.
105, University of California, Davis, Department of Economics.
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