A Theory of Procedurally Rational Choice: Optimization without Evaluation
AbstractThis paper analyses the behavior of an individual who wants to maximize his utility function, but he is not able to evaluate it. There are many ways to choose a single alternative from a given set. We show that a unique utility maximizing procedure exists. Choices induced by this optimal procedure are always transitive but generally violate the Weak Axiom. In other words, utility maximizing individuals who are unable to evaluate their objective functions fail to exhibit rational revealed preferences.
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Bibliographic InfoPaper provided by Tinbergen Institute in its series Tinbergen Institute Discussion Papers with number 06-001/1.
Date of creation: 06 Jan 2006
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Bounded rationality; optimal selection procedure; procedural rationality;
Find related papers by JEL classification:
- D01 - Microeconomics - - General - - - Microeconomic Behavior: Underlying Principles
- D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
This paper has been announced in the following NEP Reports:
- NEP-ALL-2006-04-22 (All new papers)
- NEP-CBE-2006-04-22 (Cognitive & Behavioural Economics)
- NEP-DCM-2006-04-22 (Discrete Choice Models)
- NEP-EVO-2006-04-22 (Evolutionary Economics)
- NEP-UPT-2006-04-22 (Utility Models & Prospect Theory)
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