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A plausible Decision Heuristics Model: Fallibility of human judgment as an endogenous problem

Author

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  • Carlos Sáenz-Royo

    (LEE and Department of Economics, Universitat Jaume I, Castellón, Spain)

Abstract

This study meditates about mental heuristic rules as a representation of bounded rationality in individual decision making. The heuristic process presented here represents simultaneously limited computational capacity, the capacity to determine relevant information in complex contexts around beliefs, and time as an endogenous part of decision. The mathematical model of this heuristic rule correlates to the fallibility of the agent depending on the relative outcome of the alternatives in exogenous terms; the availability of only part of the information regarding the alternatives concert by beliefs; and the amount of time the decision maker is willing to spend on a decision based on previous experience and knowing that there is a tradeoff between time and fallibility. The resulting mathematical model can be applied to many disciplines like such as opinion models, game theory, the comparison of systems of distribution of authority, and fields that utilize the technique of agent-based models (ABM) that use individual behavior to study the macroscopic results of interactions.

Suggested Citation

  • Carlos Sáenz-Royo, 2017. "A plausible Decision Heuristics Model: Fallibility of human judgment as an endogenous problem," Working Papers 2017/04, Economics Department, Universitat Jaume I, Castellón (Spain).
  • Handle: RePEc:jau:wpaper:2017/04
    as

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    References listed on IDEAS

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    More about this item

    Keywords

    Bounded rationality; individual decisions making; heuristic; fallibility; modelling decisions; ABM.;
    All these keywords.

    JEL classification:

    • A14 - General Economics and Teaching - - General Economics - - - Sociology of Economics
    • C00 - Mathematical and Quantitative Methods - - General - - - General
    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles
    • Z13 - Other Special Topics - - Cultural Economics - - - Economic Sociology; Economic Anthropology; Language; Social and Economic Stratification

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