Is individual rationality essential to market price formation? The contribution of zero‐intelligence agent trading models
Journal of Economic Methodology 16 (1):1-19 (2009)
|Abstract||The paper investigates the minimum level of individual rationality that is needed for market prices to converge toward their equilibrium level. It does so by examining the theoretical and methodological foundations of the ?zero?intelligence? (ZI) agent trading approach, with which Gode and Sunder (1993a) claimed that weak individual rationality requirements suffice to obtain equilibrium prices. The paper shows that ZI agents are endowed with a higher degree of rationality than previously believed. Though not maximizing utility, they exhibit utility?improving behavior, and their decision?making rules fulfill important predictions of the theory of choice based on maximization, namely downward?sloping individual demand and upward?sloping individual supply. Additional cognitive skills would be required, were some simplifying assumptions of the basic model removed. Gode and Sunder's analysis supports a non?neoclassical rational choice theory, in which optimization can be replaced by a variety of behavioral rules, while still preserving important results on the functioning of markets.|
|Keywords||No keywords specified (fix it)|
|Through your library||Configure|
Similar books and articles
Joachim Krueger (2000). Individual Differences and Pearson's R: Rationality Revealed? Behavioral and Brain Sciences 23 (5):684-685.
Wynn C. Stirling (2002). Games Machines Play. Minds and Machines 12 (3):327-352.
Don Ross (2006). Group Doxastic Rationality Need Not Supervene on Individual Rationality. Southern Journal of Philosophy 44 (S1):106-117.
Charles F. Manski (2011). Actualist Rationality. Theory and Decision 71 (2):195-210.
Sandra L. Schneider (2000). An Elitist Naturalistic Fallacy and the Automatic-Controlled Continuum. Behavioral and Brain Sciences 23 (5):695-696.
Reed Richter (1985). Rationality, Group Choice and Expected Utility. Synthese 63 (2):203 - 232.
Frederick Eberhardt & David Danks (2011). Confirmation in the Cognitive Sciences: The Problematic Case of Bayesian Models. Minds and Machines 21 (3):389-410.
Elyès Jouini & Clotilde Napp (forthcoming). Behavioral Biases and the Representative Agent. Theory and Decision.
Fabienne Peter (2004). Choice, Consent, and the Legitimacy of Market Transactions. Economics and Philosophy 20 (1):1-18.
Rui Mata, Andreas Wilke & Peter M. Todd (2005). Adding the Missing Link Back Into Mate Choice Research. Behavioral and Brain Sciences 28 (2):289-289.
Sorry, there are not enough data points to plot this chart.
Added to index2012-02-20
Recent downloads (6 months)0
How can I increase my downloads?