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Preferring Simplicity

Author

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  • Gilboa, Itzhak
  • Samuelson, Larry

Abstract

This paper examines circumstances under which a preference for simplicity enhances the eectiveness of inductive reasoning. We con- sider a game in which Fate chooses a data generating process and agents are characterized by inference rules that may or may not fa- vor simpler theories over more complex ones. The basic intuition is that agents who do not prefer simple theories to more complex ones are doomed to \overt" the data and therefore engage in ineective learning. The analysis places no computational or memory limitations on the agents|a preference for simplicity emerges in the presence of unlimited reasoning powers.

Suggested Citation

  • Gilboa, Itzhak & Samuelson, Larry, 2009. "Preferring Simplicity," Foerder Institute for Economic Research Working Papers 275723, Tel-Aviv University > Foerder Institute for Economic Research.
    • Handle: RePEc:ags:isfiwp:275723
    DOI: 10.22004/ag.econ.275723
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    References listed on IDEAS

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    1. Herbert A. Simon, 1955. "A Behavioral Model of Rational Choice," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 69(1), pages 99-118.
    2. Gilboa, Itzhak & Schmeidler, David, 2010. "Simplicity and likelihood: An axiomatic approach," Journal of Economic Theory, Elsevier, vol. 145(5), pages 1757-1775, September.
    3. Daniel Kahneman & Amos Tversky, 2013. "Prospect Theory: An Analysis of Decision Under Risk," World Scientific Book Chapters, in: Leonard C MacLean & William T Ziemba (ed.), HANDBOOK OF THE FUNDAMENTALS OF FINANCIAL DECISION MAKING Part I, chapter 6, pages 99-127, World Scientific Publishing Co. Pte. Ltd..
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    Cited by:

    1. Daskalova, Vessela & Vriend, Nicolaas J., 2020. "Categorization and coordination," European Economic Review, Elsevier, vol. 129(C).
    2. Daskalova, Vessela & Vriend, Nicolaas J., 2020. "Categorization and coordination," European Economic Review, Elsevier, vol. 129(C).

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