p. cm. — (Zeuthen lecture book series) Includes bibliographical references (p. ) and index. ISBN 0-262-18187-8 (hardcover : alk. paper). — ISBN 0-262-68100-5 (pbk. : alk. paper) 1. Decision-making. 2. Economic man. 3. Game theory. 4. Rational expectations (Economic theory) I. Title. II. Series.
This paper presents an axiomatic framework for the priority heuristic, a model of boundedrationality in Selten’s Boundedrationality: the adaptive toolbox, 2001) spirit of using empirical evidence on heuristics. The priority heuristic predicts actual human choices between risky gambles well. It implies violations of expected utility theory such as common consequence effects, common ratio effects, the fourfold pattern of risk taking and the reflection effect. We present an axiomatization of a parameterized version of the heuristic (...) which generalizes the heuristic in order to account for individual differences and inconsistencies. The axiomatization uses semiorders, which have an intransitive indifference part and a transitive strict preference component. The axiomatization suggests new testable predictions of the priority heuristic and makes it easier for theorists to study the relation between heuristics and other axiomatic theories such as cumulative prospect theory. (shrink)
With the discovery of voluminous discordant empirical evidence, maximizing expected utility is rapidly disappearing as the core of the theory of human rationality, and a theory of boundedrationality, embracing both the processes and products of choice, is replacing it. There remains a large task of organizing our picture of economic and social processes and adding the new facts needed to shape the theory in an empirically sound way. It is also urgent that new tools now available (...) for conducting empirical inquiry and constructing models be incorporated in social science graduate education. (shrink)
Research on boundedrationality has two cultures, which I call ‘idealistic’ and ‘pragmatic’. Technically, the cultures differ on whether they build models based on normative axioms or empirical facts, assume that people's goal is to optimize or to satisfice, do not or do model psychological processes, let parameters vary freely or fix them, aim at explanation or prediction and test models from one or both cultures. Each culture tells a story about people's rationality. The story of the (...) idealistic culture is frustrating, with people in principle being able to know what they should do, but in practice systematically failing to do it. This story makes one hide in books for intellectual solace or surrender to the designs of someone smarter. The story of the pragmatic culture is empowering: If people are educated to use the right tool in the right situation, they do well. (shrink)
Is there such a thing as boundedrationality? I first try to make sense of the question, and then to suggest which of the disambiguated versions might have answers. We need an account of boundedrationality that takes account of detailed contingent facts about the ways in which human beings fail to perform as we might ideally want to. But we should not think in terms of rules or norms which define good responses to an individual's (...) limitations, but rather in terms of desiderata, situations that limited agents can hope to achieve, and corresponding virtues of achieving them. We should not take formal theories defining optimal behavior in watered-down bounded form, even though they can impose enormous computational or cognitive demands. (shrink)
We consider several puzzles of boundedrationality. These include the Allais- and Ellsberg paradox, the disjunction effect, and related puzzles. We argue that the present account of quantum cognition—taking quantum probabilities rather than classical probabilities—can give a more systematic description of these puzzles than the alternate treatments in the traditional frameworks of boundedrationality. Unfortunately, the quantum probabilistic treatment does not always provide a deeper understanding and a true explanation of these puzzles. One reason is that (...) quantum approaches introduce additional parameters which possibly can be fitted to empirical data but which do not necessarily explain them. Hence, the phenomenological research has to be augmented by responding to deeper foundational issues. In this article, we make the general distinction between foundational and phenomenological research programs, explaining the foundational issue of quantum cognition from the perspective of operational realism. This framework is motivated by assuming partial Boolean algebras. They are combined into a uniform system via a mechanism preventing the simultaneous realization of perspectives. Gleason’s theorem then automatically leads to a distinction between probabilities that are defined by pure states and probabilities arising from the statistical mixture of pure states. This formal distinction relates to the conceptual distinction between risk and ignorance. Another outcome identifies quantum aspects in dynamic macro-systems using the framework of symbolic dynamics. Finally, we discuss several ideas that are useful for justifying complementarity in cognitive systems. (shrink)
When proponents of cognitive externalism (CE) turn to empirical studies in cognitive science to put the framework to use and to assess its explanatory success, they typically refer to perception, memory, or motor coordination. In contrast, not much has been said about reasoning. One promising avenue to explore in this respect is the theory of boundedrationality (BR). To clarify the relationship between CE and BR, we criticize Andy Clark's understanding of BR, as well as his claim that (...) BR does not fit his version of CE. We then propose and defend a version of CE—“scaffolded cognition”—that is not committed to constitutive claims about the mind, but still differs from mainstream internalism. Finally, we analyze BR from our own CE perspective, thereby clarifying its vague appeals to the environment, and argue that cognitive internalism cannot explain important aspects of the BR program. (shrink)
What is the nature of moral behavior? According to the study of boundedrationality, it results not from character traits or rational deliberation alone, but from the interplay between mind and environment. In this view, moral behavior is based on pragmatic social heuristics rather than moral rules or maximization principles. These social heuristics are not good or bad per se, but solely in relation to the environments in which they are used. This has methodological implications for the study (...) of morality: Behavior needs to be studied in social groups as well as in isolation, in natural environments as well as in labs. It also has implications for moral policy: Only by accepting the fact that behavior is a function of both mind and environmental structures can realistic prescriptive means of achieving moral goals be developed. (shrink)
The modelling of boundedrationality is currently pursued by approaches that exhibit a wide diversity of methodologies. This special issue collects five contributions that discuss different methodological aspects of these approaches. In our introduction, we map the variety of methodological positions with respect to three questions. First, what kinds of evidence do the respective approaches consider relevant for modelling boundedrationality? Second, what kind of modelling desiderata do the respective approaches focus on? And third, how do (...) the respective approaches justify the normative validity of boundedrationality? To broaden the picture, we not only discusss the five contributions of this issue, but also include relevant positions from the extant literature. (shrink)
Cimpian et al. observed that we accept generic statements of the form ‘Gs are f’ on relatively weak evidence, but that if we are unfamiliar with group G and we learn a generic statement about it, we still treat it inferentially in a much stronger way: all Gs are f. This paper makes use of notions like ‘representativeness’, ‘contingency’ and ‘relative difference’ from psychology to provide a uniform semantics of generics that explains why people accept generics based on weak evidence. (...) The spirit of the approach has much in common with Leslie’s cognition-based ideas about generics, but the semantics will be grounded on a strengthening of Cohen’s relative readings of generic sentences. In contrast to Leslie and Cohen, we propose a uniform semantic analysis of generics. The basic intuition is that a generic of the form ‘Gs are f’ is true because f is typical for G, which means that f is valuably associated with G. We will make use of Kahneman and Tversky’s Heuristics and Biases approach, according to which people tend to confuse questions about probability with questions about representativeness, to explain pragmatically why people treat many generic statements inferentially in a much stronger way. (shrink)
In this paper, we examine the problems facing a policy maker who observes inconsistent choices made by agents who are boundedly rational. We contrast a model-less and a model-based approach to welfare economics. We make the case for the model-based approach and examine its advantages as well as some problematic issues associated with it.
Empirical research on Rational Choice Theory has brought up two focus of the economics laws problem. On one hand, we find the authors who state that the neoclassical economics laws are explanatory and predictive on specific cases: in transparent contexts in which the standard rationality operates successfully. On the other hand, we find the authors who state that the descriptive theories of the rational choice opens up a research path in which fundamental principles of the neoclassical building could be (...) questioned. Both view points have generated an important standard Rational Choice Theory revision what has produced the so called descriptive view point. It implies understanding that most of the choices take place under risky or uncertainty conditions and, that, these choices are far more complex than the normative Rational Choice Theory supposes. This article's main goal is to expand the descriptive point of view in rational choice, theorizing how some factors, coming from the social and cultural environment, operate within the rational choice. Into space of this research essay we find the debatable question of whether these sort of proposals expands the explanation of the deviation of the rational choice normative theory, and that, of the disturbing causes of the microeconomics laws, or they call into question fundamental principles of these laws and therefore they are opening the possibility to focus some economics issues in a new different manner. (shrink)
This is a survey of boundedrationality, an area of theoretical macroeconomics which is receiving increased attention. The book is written by a leading macroeconomist who outlines the issues involved, describes some of the analytic tools that are being used, and shows how they can be applied in a range of models. It points to further potential positive developments of the theory as well as some of its limitations.
Empirical research on Rational Choice Theory has brought up two focus of the economics laws problem. On one hand, we find the authors who state that the neoclassical economics laws are explanatory and predictive on specific cases: in transparent contexts in which the standard rationality operates successfully. On the other hand, we find the authors who state that the descriptive theories of the rational choice opens up a research path in which fundamental principles of the neoclassical building could be (...) questioned. Both view points have generated an important standard Rational Choice Theory revision what has produced the so called descriptive view point . It implies understanding that most of the choices take place under risky or uncertainty conditions and, that, these choices are far more complex than the normative Rational Choice Theory supposes. This article's main goal is to expand the descriptive point of view in rational choice, theorizing how some factors, coming from the social and cultural environment, operate within the rational choice. Into space of this research essay we find the debatable question of whether these sort of proposals expands the explanation of the deviation of the rational choice normative theory, and that, of the disturbing causes of the microeconomics laws, or they call into question fundamental principles of these laws and therefore they are opening the possibility to focus some economics issues in a new different manner. (shrink)
I study a market model in which profit-maximizing firms compete in multidimensional pricing strategies over a consumer, who is limited in his ability to grasp such complicated objects and therefore uses a sampling procedure to evaluate them. Firms respond to increased competition with an increased effort to obfuscate, rather than with more competitive pricing. As a result, consumer welfare is not enhanced and may even deteriorate. Specifically, when firms control both the price and the quality of each dimension, and there (...) are diminishing returns to quality, increased competition implies an efficiency loss which is entirely borne by consumers. KEYWORDS. Boundedrationality, industrial organization, multi-dimensional pricing, law of small numbers, market exploitation, obfuscation. (shrink)
Anthropologists believe that human behavior is governed by culturally transmitted norms, and that such norms contain accumulated wisdom that allows people to behave sensibly even though they do not understand why they do what they do. Economists and other rational choice theorists have been skeptical about functionalist claims because anthropologists have not provided any plausible mechanism which could explain why norms have this property. Here, we outline two such mechanisms. We show that occasional learning when coupled with cultural transmission and (...) a tendency to conform can lead to the spread of sensible norms even though very few people understand why they are sensible. We also show that norms that help solve problems of selfcontrol that arise from time-inconsistent preferences can spread if individuals tend to imitate successful people and are occasionally influenced by members of other groups with different norms. (shrink)
Humans and animals make inferences about the world under limited time and knowledge. In contrast, many models of rational inference treat the mind as a Laplacean Demon, equipped with unlimited time, knowledge, and computational might. Following H. Simon's notion of satisficing, the authors have proposed a family of algorithms based on a simple psychological mechanism: one-reason decision making. These fast and frugal algorithms violate fundamental tenets of classical rationality: They neither look up nor integrate all information. By computer simulation, (...) the authors held a competition between the satisficing "Take The Best" algorithm and various "rational" inference procedures. The Take The Best algorithm matched or outperformed all competitors in inferential speed and accuracy. This result is an existence proof that cognitive mechanisms capable of successful performance in the real world do not need to satisfy the classical norms of rational inference. (shrink)
How can we study boundedrationality? We answer this question by proposing rational task analysis —a systematic approach that prevents experimental researchers from drawing premature conclusions regarding the rationality of agents. RTA is a methodology and perspective that is anchored in the notion of boundedrationality and aids in the unbiased interpretation of results and the design of more conclusive experimental paradigms. RTA focuses on concrete tasks as the primary interface between agents and environments and (...) requires explicating essential task elements, specifying rational norms, and bracketing the range of possible performance, before contrasting various benchmarks with actual performance. After describing RTA’s core components we illustrate its use in three case studies that examine human memory updating, multitasking behavior, and melioration. We discuss RTA’s characteristic elements and limitations by comparing it to related approaches. We conclude that RTA provides a useful tool to render the study of boundedrationality more transparent and less prone to theoretical confusion. (shrink)
This paper focuses on tacit versus explicit uses of plural performance metrics as a primary methodological characteristic. This characteristic usefully distinguishes two schools of normative analysis and their approaches to normative interpretations of boundedrationality. Both schools of thought make normative claims about boundedrationality by comparing the performance of decision procedures using more than one performance metric. The consistency school makes tacit reference to performance metrics outside its primary axiomatic framework, but lexicographically promotes internal axiomatic (...) consistency as the primary, and in most cases sufficient, normative outcome with which to undertake welfare comparisons. The consistency school's axiomatization program, in both neoclassical and behavioral forms, pre-commits to welfare interpretations that follow a hierarchy of rationalities based on the stringency of restrictions that different axiomatizations impose on choice data. In contrast, the ecological rational.. (shrink)
The boundedrationality theory has been perceived by social scientists as a more flexible version of the rational choice theory, also called expected utility theory. The former has the avantage of taking into consideration the fact that information is generally costly. It corrects the RCT on an important point. For the social sciences, the RCT is very useful, but far from representing a general theory which could explain the various kinds of behaviour the social sciences are confronted to, (...) even in its more flexible BRT version. The article makes the postulates underlying the RCT and the BRT explicit and shows that, when some of the postulates are eliminated, a genuinely general model is obtained: the model which is actually used in convincing sociological analyses.La Théorie de la rationalité limitée a été perçue par les sciences sociales comme une version assouplie de la théorie du choix rationnel, aussi appelée Modèle de lutilité espérée. La TRL a lavantage de tenir compte notamment du fait que linformation est généralement coûteuse, corrigeant ainsi lirréalisme de la TCR sur un point essentiel. Du point de vue des sciences sociales, la TCR est fort utile, mais elle est loin de proposer une théorie générale de la rationalité permettant de rendre compte des divers types de comportement dont les sciences sociales ont à connaître, même dans sa version assouplie de la TRL. On identifie ici les postulats de la TCR et de la TRL et lon montre quen abandonnant certains de ces postulats, lon définit un modèle, le MRG qui, lui, peut prétendre à la généralité. Cest celui qui est utilisé naturellement par les analyses sociologiques qui ses sont imposées. (shrink)
We report the results of a dual-task study in which participants performed a tracking and typing task under various experimental conditions. An objective payoff function was used to provide explicit feedback on how participants should trade off performance between the tasks. Results show that participants’ dual-task interleaving strategy was sensitive to changes in the difficulty of the tracking task and resulted in differences in overall task performance. To test the hypothesis that people select strategies that maximize payoff, a Cognitively (...) class='Hi'>Bounded Rational Analysis model was developed. This analysis evaluated a variety of dual-task interleaving strategies to identify the optimal strategy for maximizing payoff in each condition. The model predicts that the region of optimum performance is different between experimental conditions. The correspondence between human data and the prediction of the optimal strategy is found to be remarkably high across a number of performance measures. This suggests that participants were honing their behavior to maximize payoff. Limitations are discussed. (shrink)
Simon’s notion of boundedrationality is deeply intertwined with his activity as a cognitive psychologist and founder of so-called cognitivism, a mainstream approach in cognitive psychology until the 1980s. Cognitivism, understood as ‘symbolic information processing,’ provided the first cognitive psychology foundation to boundedrationality. Has boundedrationality since then fully followed the development of cognitive psychology beyond symbolic information processing in the post-Simonian era? To answer this question, this paper focuses on Simon’s opposition during (...) the 1990s to a new view of cognition called situated cognition, which has since put into question the entire view in cognitive psychology of humans as symbolic information processors. This paper then reads the cognitivism/situated cognition debate through the lens of current boundedrationality research in economics, in order to inquire into whether it has tackled the issues in that controversy; to envisage possible new foundations for a cognitive psychology-based boundedrationality. (shrink)
In this paper we question the hypothesis of boundedrationality against full rationality in the context of job changing behavior, via simple econometric explorations on microdata drawn from Worker Histories Italian Panel and Sample of Integrated Labor Market Biographies. The identification strategy builds on a quasi-counterfactual experiment in which the performance of each voluntary mover is compared to the average performance of a peer-group of stayers of the same skill group, co-workers in the firm from which the (...) movers’ job switch originated. Voluntary movers are identifiable in the WHIP and SIAB datasets, while it is not possible to do the same among the stayers. Full rationality suggests that the performance of voluntary movers should be superior to the stayers’ as the involuntary stayers have a smaller decision set from which to choose. In this exploration we find a clear opposite result, which we take as evidence of boundedrationality of the movers. (shrink)
The adoption of an individualistic perspective on reasoning, choice and decision is a spring of paradoxes of conflicts. Usually the agents immerse in conflicts are drawn or modelled as rational individuals with targets well defined and full capabilities to access to information, without both temporal limitations and perfect reasoning abilities to obtain their preferences are taken account.However, other models of agent, in the boundedrationality perspective, could help to understand better the interrelationships. I adopt embedded argumentative reasoning processes (...) as satisfying criteria to analyze the expert function in a new socio technical environment that has changed deeply the mechanism and tools to access and to aggregate information. The open access to information and institutional arrangements addressed towards team knowledge could offer other kind of tools to affront the conflict, even its possible benefits.The “crowd expertise” is emerging as an actual possibility and it must be incorporated to affront with conflicts. The very possibility of obtaining knowledge generated by “many minds”, collective wisdoms, brings up a real challenge to the conservative or elitist conception of the masses, because masses now emerge as a smart collective user, with new mechanisms to select and produce quality knowledge. These new collective actions differ deeply from the traditional modes of social organization. A new mass society is emerging now as a hybrid one that breaks some conceptual traditional models, such as Ortega y Gasset’s ones, and induces a structured way of flourishing both new practices and new knowledge with transforming capabilities. (shrink)
The paper locates, appreciates, and extends several dimensions of Simon’s work in the direction of more recent contributions by people such as Gigerenzer and Dennett. The author’s “crowbar model of method” is compared to Simon’s scissors metaphor. Against an evolutionary background, both support a pragmatic rather than strong realist approach to theoretically deep and complex problems. The importance of implicit knowledge is emphasized, for humans, as well as nonhuman animals. Although Simon was a realist in some respects, his work on (...)boundedrationality, satisficing, problem solving, heuristics, models, and scientific discovery mark him as a pragmatist. Indeed, he should be regarded as one of the great American pragmatists, alongside Peirce, James, Dewey, and a few others. (shrink)
In this paper I will present an analysis of the impact that the notion of “boundedrationality”, introduced by Herbert Simon in his book “Administrative Behavior”, produced in the field of Artificial Intelligence (AI). In particular, by focusing on the field of Automated Decision Making (ADM), I will show how the introduction of the cognitive dimension into the study of choice of a rational (natural) agent, indirectly determined - in the AI field - the development of a line (...) of research aiming at the realisation of artificial systems whose decisions are based on the adoption of powerful shortcut strategies (known as heuristics) based on “satisficing” - i.e. non optimal - solutions to problem solving. I will show how the “heuristic approach” to problem solving allowed, in AI, to face problems of combinatorial complexity in real-life situations and still represents an important strategy for the design and implementation of intelligent systems. (shrink)
In this paper, a mixed duopoly dynamic model with boundedrationality is built, where a public-private joint venture and a private enterprise produce homogeneous products and compete in the same market. The purpose of this research is to study the stability and the multistability of the established model. The local stability of all the equilibrium points is discussed by using Jury condition, and the stability region of the Nash equilibrium point has been given. A special fractal structure called (...) “hub of periodicity” has been found in the two-parameter space by numerical simulation. In addition, the phenomena of multistability are also studied using basins of attraction and 1-D bifurcation diagrams with adiabatic initial conditions. We find that there are two different coexistences of multiple attractors. And, the fractal structure of the attracting basin is also analyzed, and the formation mechanisms of “holes” and “contact” bifurcation have been revealed. At last, the long-term profits of the enterprises are studied. We find that some enterprises can even make more profits under a chaotic circumstance. (shrink)
Álvarez J.F. (2016) Conflicts, BoundedRationality and Collective Wisdom in a Networked Society. In: Scarafile G., Gruenpeter Gold L. (eds) Paradoxes of Conflicts. Logic, Argumentation & Reasoning (Interdisciplinary Perspectives from the Humanities and Social Sciences), vol 12. Springer, Cham -/- The adoption of an individualistic perspective on reasoning, choice and decision is a spring of paradoxes of conflicts. Usually the agents immerse in conflicts are drawn or modelled as rational individuals with targets well defined and full capabilities to (...) access to information, without both temporal limitations and perfect reasoning abilities to obtain their preferences are taken account. -/- However, other models of agent, in the boundedrationality perspective, could help to understand better the interrelationships. I adopt embedded argumentative reasoning processes as satisfying criteria to analyze the expert function in a new socio technical environment that has changed deeply the mechanism and tools to access and to aggregate information. The open access to information and institutional arrangements addressed towards team knowledge could offer other kind of tools to affront the conflict, even its possible benefits. -/- The “crowd expertise” is emerging as an actual possibility and it must be incorporated to affront with conflicts. The very possibility of obtaining knowledge generated by “many minds”, collective wisdoms, brings up a real challenge to the conservative or elitist conception of the masses, because masses now emerge as a smart collective user, with new mechanisms to select and produce quality knowledge. These new collective actions differ deeply from the traditional modes of social organization. A new mass society is emerging now as a hybrid one that breaks some conceptual traditional models, such as Ortega y Gasset’s ones, and induces a structured way of flourishing both new practices and new knowledge with transforming capabilities. (shrink)
Normative game theory unsatisfactorily explains rational behavior. Real people do not behave as predicted, and what is prescribed as rational behavior is normally unattainable in real-life. The problem is that current normative analysis does not account for people's cognitive limitations – their boundedrationality. However, this paper develops an account of boundedrationality that explains the rationality of more realistic behavior. I focus on the Centipede Game, in which boundedly rational players explore and test others' (...) immediate behavior, until they can apply limited backward induction. The result is that the game has a solution in the form of a subjective Nash equilibrium, which boundedly rational players can possibly realize. (shrink)
Decision theory seems to offer a very attractive normative framework for individual and social choice under uncertainty. The decisionmaker should think of her choice situation, at any given moment, in terms of a set of possible outcomes, that is, specifications of the possible consequences of choice, described in light of the decisionmaker's goals; a set of possible actions; and a "state set" consisting of possible prior "states of the world." It is this framework for choice which provides the foundation for (...) expected utility theory, as demonstrated in the work of Leonard Savage. Problems arise, however, when the decisionmaker is boundedly rational: when the mental process of thinking about outcomes, actions, and states is itself expensive and time consuming. In the case of the unboundedly rational decisionmaker, decision theory enjoins her to employ maximally specific outcomes; to consider all possible actions; and to use a set of mutually exclusive and collective exhaustive states, each of which is sufficiently finely specified so that each action, together with each state, yields one and only one maximally specific outcome. In the case of the boundedly rational decisionmaker, this procedure is either infeasible or, if feasible, irrational. This paper presents the problem of boundedrationality. It surveys possible solutions, none of which are found to be attractive. And it concludes by discussing the difficulties that the problem of boundedrationality poses for the welfarist program for legal scholarship presented by Louis Kaplow and Steven Shavell in their book, Fairness versus Welfare. (shrink)
Replacing logical coherence by effectiveness as criteria of rationality, Gigerenzer et al. show that simple heuristics can outperform comprehensive procedures (e.g., regression analysis) that overload human limited information processing capacity. Although their work casts long overdue doubt on the normative status of the Rational Choice Paradigm, their methodology leaves open its relevance as to how decisions are actually made.
That the rationality of individual people is ‘bounded’ – that is, finite in scope and representational reach, and constrained by the opportunity cost of time – cannot reasonably be controversial as an empirical matter. In this context, the paper addresses the question as to why, if economics is an empirical science, economists introduce bounds on the rationality of agents in their models only grudgingly and partially. The answer defended in the paper is that most economists are interested (...) primarily in markets and only secondarily in the dynamics of individual decisions – specifically, they are interested in these dynamics mainly insofar as they might systematically influence the most useful approaches to modeling interesting markets. In market contexts, bounds on rationality are typically generated by institutional and informational properties specific to the market in question, which arise and are sustained by structural dynamics that do not originate in or reduce to individuals' decisions or psychologic.. (shrink)
Rationality has been a principle widely assumed in economics from early on. In contrast, rationality in the formation of economic expectations is rather new. Since the term “rational expectations” has meanwhile become a kind of slogan for diverse issues in economics as in related fields, there is some danger of authors’ not always being aware of the true meaning of this technical term. Sometimes it is used, in a context where expectation formation about uncertain events is essential, as (...) if rational expectations solved this fundamental problem. (shrink)
Stanovich & West's target article undervalues the power of implicit learning (particularly reinforcement learning). Implicit learning may allow the learning of more rational responses–and sometimes even generalisation of knowledge–in contexts where explicit, abstract knowledge proves only of limited value, such as for economic decision-making. Four other comments are made.
It is argued that a truly Humean approach to social interaction and to normative reflection on how we should interact needs to get even closer to the facts than the Binmore program suggests. In view of the facts Binmore’s normative conclusions on bargaining as well as on the nature of the equilibria of the game of life both seem precarious.
Many proponents of deliberative democracy expect reasonable citizens to engage in rational argumentation. However, this expectation runs up against findings by behavioral economists and social psychologists revealing the extent to which normal cognitive functions are influenced by boundedrationality. Individuals regularly utilize an array of biases in the process of making decisions, which inhibits our argumentative capacities by adversely affecting our ability and willingness to be self-critical and to give due consideration to others’ interests. Although these biases cannot (...) be overcome, I draw on scientifically corroborated insights offered by Adam Smith to show that they can be kept in check if certain affective and cognitive capacities are cultivated. Smith provides a compelling account of how to foster sympathetic, impartial, and projective role-taking in the process of interacting with others, which can greatly enhance our capacity and willingness to critically assess our own interests and fairly consider those of others. (shrink)
In this article, I revisit Pierre Bourdieu's concept of habitus and contrast it with Herbert Simon's notion of boundedrationality. Through a discussion of the literature of economic sociology on status and Fligstein's political-cultural approach, I argue that this concept can be a source of fresh insights into empirical problems. I find that the greater the change in the social environment, the more salient the benefits of using habitus as a tool to analyze agents' behavior.
In this paper, a decision-making competition game model concerning governments, agricultural enterprises, and the public, all of which participate in the reduction of nitrogen emissions in the watersheds, is established based on boundedrationality. First, the stability conditions of the equilibrium points in the system are discussed, and the stable region of the Nash equilibrium is determined. Then, the bifurcation diagram, maximal Lyapunov exponent, strange attractor, and sensitive dependence on the initial conditions are shown through numerical simulations. The (...) research shows that the adjustment speed of three players’ decisions may alter the stability of the Nash equilibrium point and lead to chaos in the system. Among these decisions, a government’s decision has the largest effect on the system. In addition, we find that some parameters will affect the stability of the system; when the parameters become beneficial for enterprises to reduce nitrogen emissions, the increase in the parameters can help control the chaotic market. Finally, the delay feedback control method is used to successfully control the chaos in the system and stabilize it at the Nash equilibrium point. The research of this paper is of great significance to the environmental governance decisions and nitrogen reduction management. (shrink)
We propose a framework for including information-processing bounds in rational analyses. It is an application of bounded optimality (Russell & Subramanian, 1995) to the challenges of developing theories of mechanism and behavior. The framework is based on the idea that behaviors are generated by cognitive mechanisms that are adapted to the structure of not only the environment but also the mind and brain itself. We call the framework computational rationality to emphasize the incorporation of computational mechanism into the (...) definition of rational action. Theories are specified as optimal program problems, defined by an adaptation environment, a bounded machine, and a utility function. Such theories yield different classes of explanation, depending on the extent to which they emphasize adaptation to bounds, and adaptation to some ecology that differs from the immediate local environment. We illustrate this variation with examples from three domains: visual attention in a linguistic task, manual response ordering, and reasoning. We explore the relation of this framework to existing “levels” approaches to explanation, and to other optimality-based modeling approaches. (shrink)
A generalization of the standard n-person game is presented, with flexible information requirements suitable for players constrained by boundedrationality. Strategies (complete contingency plans) are replaced by "policies," i. e., end-mean pairs of candidate goals and "controls" (partial contingency plans). The existence of individual objective functions over the joint policy choice set is axiomatized in terms of primitive preference and probability orders. Conditions are given for the existence of pure policy Nash equilibrium points in n-person games, and pure (...) policy Nash bargaining and equilibrium threat solutions in 2-person policy games. Connectedness of the policy and payoff sets is not required. (shrink)
In this paper, the dynamics of Cournot duopoly game with a generalized boundedrationality is considered. The fractional boundedrationality of the Cournot duopoly game is introduced. The conditions of local stability analysis of equilibrium points of the game are derived. The effect of fractional marginal profit on the game is investigated. The complex dynamics behaviors of the game are discussed by numerical computation when parameters are varied.