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The computational complexity of boundedly rational choice behavior

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  • Thomas DEMUYNCK

Abstract

This research examines the computational complexity of two boundedly rational choice models that use multiple rationales to explain observed choice behavior. First, we show that the notion of rationalizability by K rationales as introduced by Kalai, Rubinstein, and Spiegler (2002) is NP-complete for K greater or equal to two. Second, we show that the question of sequential rationalizability by K rationales, introduced by Manzini and Mariotti (2007), is NP-complete for K greater or equal to three if choices are single valued, and that it is NP-complete for K greater or equal to one if we allow for multi-valued choice correspondences. Motivated by these results, we present two binary integer feasibility programs that characterize the two boundedly rational choice models and we compute their power. Finally, by using results from descriptive complexity theory, we explain why it has been so difficult to obtain `nice' characterizations for these models.

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  • Thomas DEMUYNCK, 2010. "The computational complexity of boundedly rational choice behavior," Working Papers of Department of Economics, Leuven ces10.23, KU Leuven, Faculty of Economics and Business (FEB), Department of Economics, Leuven.
    • Handle: RePEc:ete:ceswps:ces10.23
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    Cited by:

    1. Ronen Gradwohl & Eran Shmaya, 2013. "Tractable Falsifiability," Discussion Papers 1564, Northwestern University, Center for Mathematical Studies in Economics and Management Science.

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