"But Can't we Get the Same Thing with a Standard Model?" Rationalizing Bounded-Rationality Models
AbstractThis paper discusses a common criticism of economic models that depart from the standard rational-choice paradigm - namely, that the phenomena addressed by such models can be "rationalized" by some standard model. I criticize this criterion for evaluating bounded-rationality models. Using a market model with boundedly rational consumers due to Spiegler (2006a) as a test case, I show that even when it initially appears that a bounded-rationality model can be rationalized by a standard model, the rationalizing models tend to come with unwarranted "extra baggage". I conclude that we should impose a greater burden of proof on rationalizations that are offered in refutation of such models.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 21428.
Date of creation: 15 Mar 2010
Date of revision:
Bounded rationality; methodology; theory selection; rationalizations;
Other versions of this item:
- Spiegler, Ran, 2011. "‘But Can'T We Get The Same Thing With A Standard Model?’ Rationalizing Bounded-Rationality Models," Economics and Philosophy, Cambridge University Press, vol. 27(01), pages 23-43, March.
- D03 - Microeconomics - - General - - - Behavioral Microeconomics; Underlying Principles
- B49 - Schools of Economic Thought and Methodology - - Economic Methodology - - - Other
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-03-28 (All new papers)
- NEP-EVO-2010-03-28 (Evolutionary Economics)
- NEP-HPE-2010-03-28 (History & Philosophy of Economics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Olivier Compte & Andrew Postlewaite, 2003.
PIER Working Paper Archive
03-009, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania.
- Sandeep Baliga & Jeffrey C. Ely, 2011. "Mnemonomics: The Sunk Cost Fallacy as a Memory Kludge," American Economic Journal: Microeconomics, American Economic Association, vol. 3(4), pages 35-67, November.
- Matthew Rabin, 2003.
"A Perspective on Psychology and Economics,"
General Economics and Teaching
- Rabin, Mathew, 2002. "A Perspective on Psychology and Economics," Department of Economics, Working Paper Series qt4z78n1r9, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
- Rabin, Matthew, 2002. "A Perspective on Psychology and Economics," Department of Economics, Working Paper Series qt2wr3z049, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
- Ariel Rubinstein, 2004.
"Dilemmas of an Economic Theorist,"
Econometric Society 2004 North American Summer Meetings
661, Econometric Society.
- Rani Spiegler, 2005.
"The Market for Quacks,"
784828000000000634, UCLA Department of Economics.
- Spiegler, Ran, 2006.
"Competition over agents with boundedly rational expectations,"
Econometric Society, vol. 1(2), pages 207-231, June.
- Ran Spiegler, 2005. "Competition over Agents with Boundedly Rational Expectations," Levine's Bibliography 122247000000000535, UCLA Department of Economics.
- Emir Kamenica, 2008. "Contextual Inference in Markets: On the Informational Content of Product Lines," American Economic Review, American Economic Association, vol. 98(5), pages 2127-49, December.
- Eddie Dekel & Barton L. Lipman, 2010.
"How (Not) to Do Decision Theory,"
Annual Review of Economics,
Annual Reviews, vol. 2(1), pages 257-282, 09.
- Lucas, Robert Jr, 1976. "Econometric policy evaluation: A critique," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 1(1), pages 19-46, January.
- Binmore, Ken & Shaked, Avner, 2010. "Experimental economics: Where next?," Journal of Economic Behavior & Organization, Elsevier, vol. 73(1), pages 87-100, January.
Blog mentionsAs found by EconAcademics.org, the blog aggregator for Economics research:
- Bounded rationality or limited information?
by Economic Logician in Economic Logic on 2010-04-21 14:08:00
- Szech, Nora, 2011. "Becoming a bad doctor," Journal of Economic Behavior & Organization, Elsevier, vol. 80(1), pages 244-257.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Ekkehart Schlicht).
If references are entirely missing, you can add them using this form.