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A Non-Bayesian Approach to (Un)Bounded Rationality

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  • Werner Güth

    () (Max Planck Institute of Economics, Strategic Interaction Group)

Abstract

Can one define and test the hypothesis of (un)bounded rationality in stochastic choice tasks without endorsing Bayesianism? Similar to the state specificity of assets, we rely on state-specific goal formation. In a given choice task, the list of state-specific goal levels is optimal if one cannot increase the goal level for one state without having to decrease that for other states. We show that this allows to relate optimality more easily to bounded rationality where we interpret goal levels as aspirations. If for the latter there exist choices satisfying all state-specific aspirations and if one such choice is used, we speak of satisficing which may or may not be optimal.

Suggested Citation

  • Werner Güth, 2007. "A Non-Bayesian Approach to (Un)Bounded Rationality," Jena Economic Research Papers 2007-035, Friedrich-Schiller-University Jena.
  • Handle: RePEc:jrp:jrpwrp:2007-035
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    File URL: http://zs.thulb.uni-jena.de/servlets/MCRFileNodeServlet/jportal_derivate_00033609/wp_2007_035.pdf
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    References listed on IDEAS

    as
    1. Siegfried Berninghaus & Werner Güth & M. Vittoria Levati & Jianying Qiu, 2006. "Satisficing in sales competition: experimental evidence," Papers on Strategic Interaction 2006-32, Max Planck Institute of Economics, Strategic Interaction Group.
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    Keywords

    Satisficing; bounded rationality; optimality;

    JEL classification:

    • B4 - Schools of Economic Thought and Methodology - - Economic Methodology
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • D10 - Microeconomics - - Household Behavior - - - General

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