The neural basis of bounded rational behavior
AbstractBounded rational behaviour is commonly observed in experimental games and in real life situations. Neuroeconomics can help to understand the mental processing underlying bounded rationality and out-of-equilibrium behaviour. Here we report results from recent studies on the neural basis of limited steps of reasoning in a competitive setting – the beauty contest game. We use functional magnetic resonance imaging (fMRI) to study the neural correlates of human mental processes in strategic games. We apply a cognitive hierarchy model to classify subject’s choices in the experimental game according to the degree of strategic reasoning so that we can identify the neural substrates of different levels of strategizing. We found a correlation between levels of strategic reasoning and activity in a neural network related to mentalizing, i.e. the ability to think about other’s thoughts and mental states. Moreover, brain data showed how complex cognitive processes subserve the higher level of reasoning about others. We describe how a cognitive hierarchy model fits both behavioural and brain data.
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Bibliographic InfoPaper provided by Department of Economic Theory and Economic History of the University of Granada. in its series ThE Papers with number 10/11.
Length: 21 pages
Date of creation: 01 Oct 2010
Date of revision:
Game theory; Bounded rationality; Neuroeconomics;
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-10-16 (All new papers)
- NEP-EVO-2010-10-16 (Evolutionary Economics)
- NEP-EXP-2010-10-16 (Experimental Economics)
- NEP-GTH-2010-10-16 (Game Theory)
- NEP-HPE-2010-10-16 (History & Philosophy of Economics)
- NEP-NEU-2010-10-16 (Neuroeconomics)
- NEP-UPT-2010-10-16 (Utility Models & Prospect Theory)
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