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Analogies and Theories: The Role of Simplicity and the Emergence of Norms

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  • Gabrielle Gayer

    ()
    (Department of Economics [Israël] - Bar-Ilan University)

  • Itzhak Gilboa

    ()
    (GREGH - Groupement de Recherche et d'Etudes en Gestion à HEC - GROUPE HEC - CNRS : UMR2959, Tel-Aviv University - Tel-Aviv University)

Abstract

We consider the dynamics of reasoning by general rules (theories) and specific cases (analogies). When an agent faces an exogenous process, we show that, under mild conditions, if reality happens to be simple, the agent will converge to adopt a theory and discard analogical thinking. If, however, reality is complex, the agent may rely on analogies more than on theories. By contrast, when the process is generated by agents' predictions, convergence to a theory is much more likely, as in the emergence of norms in a coordination game. Mixed cases, involving noisy endogenous processes are likely to give rise to complex dynamics of reasoning, switching between theories and analogies.

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Bibliographic Info

Paper provided by HAL in its series Working Papers with number hal-00712917.

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Date of creation: 28 Jun 2012
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Handle: RePEc:hal:wpaper:hal-00712917

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Keywords: analogies; theories; simplicity; norms;

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  1. Itzhak Gilboa & David Schmeidler, 2002. "Inductive Inference: An Axiomatic Approach," Levine's Working Paper Archive 391749000000000544, David K. Levine.
  2. Ehud Kalai & Ehud Lehrer, 1990. "Rational Learning Leads to Nash Equilibrium," Discussion Papers, Northwestern University, Center for Mathematical Studies in Economics and Management Science 895, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  3. Gilboa,Itzhak & Schmeidler,David, 2001. "A Theory of Case-Based Decisions," Cambridge Books, Cambridge University Press, Cambridge University Press, number 9780521003117.
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