Bounded Rationality in the Centipede Game

Episteme 8 (3):262-280 (2011)

Abstract

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 bounded rationality. However, this paper develops an account of bounded rationality 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

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Author's Profile

Ashton T. Sperry
University of Missouri, Columbia (PhD)

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Convention: A Philosophical Study.David Kellogg Lewis - 1969 - Cambridge, MA, USA: Wiley-Blackwell.
Convention: A Philosophical Study.David K. Lewis - 1971 - Philosophy and Rhetoric 4 (2):137-138.
Rationality and Coordination.Cristina Bicchieri - 1996 - British Journal for the Philosophy of Science 47 (4):627-629.

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