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Games, Goals, and Bounded Rationality

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  • Tesfatsion, Leigh S.

Abstract

abstracted in Zentralblatt fur Mathematik, August 1985, p. 410 This article presents a generalization of the standard N-person game with flexible information requirements suitable for players constrained by certain types of bounded rationality. In particular, strategies (complete contingency plans) are replaced with partial contingency plans augmented by goals. Both utility and probability are conditioned on selected goals and actions (g,a), and both are defined over the same set of possible (g,a)-conditioned events. Well-known existence theorems for Nash equilibria and Nash bargaining solutions are extended to this context. For adaptive sequential games, the symmetrical treatment of payoffs and probability assessments permits players to learn their successive moves via "criterion filtering." That is, the expected utility criterion function of each player can be directly updated in each decision period using transitional utility assessments in a manner analogous to Bayes' rule for updating probability distributions using transitional probability assessments. Annotated pointers to related work can be accessed here: http://www2.econ.iastate.edu/tesfatsi/cfhome.htm

Suggested Citation

  • Tesfatsion, Leigh S., 1984. "Games, Goals, and Bounded Rationality," Staff General Research Papers Archive 11209, Iowa State University, Department of Economics.
  • Handle: RePEc:isu:genres:11209
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    Cited by:

    1. Jehiel, Philippe, 2005. "Analogy-based expectation equilibrium," Journal of Economic Theory, Elsevier, vol. 123(2), pages 81-104, August.

    More about this item

    Keywords

    Bounded rationality; N-person game; goals; criterion filtering;

    JEL classification:

    • C6 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling
    • C7 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory

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