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Case-Based Optimization

Author

Listed:
  • Itzhak Gilboa

    (Northwestern University [Evanston])

  • David Schmeidler

    (TAU - Tel Aviv University, OSU - Ohio State University [Columbus])

Abstract

An aspiration level adjustment rule is "realistic" if the aspiration level is (almost always) set to be an average of its previous value and the best average performance so far encountered. It is "ambitious" if the aspiration level is set to exceed the maximal average performance by some constant infinitely often. We analyze a case-based decision maker with a realistic-but-ambitious aspiration level adjustment rule facing a multi-armed bandit repeatedly. Though unaware of the payoff distributions corresponding to the arms of the bandit, the decision maker will asymptotically choose only expected-utility maximizing acts.

Suggested Citation

  • Itzhak Gilboa & David Schmeidler, 1996. "Case-Based Optimization," Post-Print hal-00753138, HAL.
    • Handle: RePEc:hal:journl:hal-00753138
    DOI: 10.1006/game.1996.0056
    as

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    References listed on IDEAS

    as
    1. Itzhak Gilboa & David Schmeidler, 1993. "Case-Based Consumer Theory," Discussion Papers 1025, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
    2. Itzhak Gilboa & David Schmeidler, 1995. "Case-Based Decision Theory," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 110(3), pages 605-639.
    3. Kandori, Michihiro & Mailath, George J & Rob, Rafael, 1993. "Learning, Mutation, and Long Run Equilibria in Games," Econometrica, Econometric Society, vol. 61(1), pages 29-56, January.
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