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. Bounded rationality, industrial organization, multi-dimensional pricing, law of small numbers, market exploitation, obfuscation. (shrink)

In this short note I speculate about the various ways in which the study of neurological aspects of decision making could be fruitful for economic modelling.

Foreword by Julian Assange............................................................................................. .. 4 Introduction........................................................................................ ................................. 5 Correspondence with Academic Journals........................................................................... 6..

An observer attempts to infer the unobserved ranking of two ideal objects, A and B, from observed rankings in which these objects are `accompanied' by `noise' components, C and D. In the first ranking, A is accompanied by C and B is accompanied by D, while in the second ranking, A is accompanied by D and B is accompanied by C. In both rankings, noisy-A is ranked above noisy-B. The observer infers that ideal-A is ranked above ideal-B. This commonly used (...) inference rule is formalized for the case in which A,B,C,D are sets. Let X be a finite set and let be a linear ordering on 2X. The following condition is imposed on . For every quadruple (A,B,C,D)∈Y, where Y is some domain in (2X)4, if and , then . The implications and interpretation of this condition for various domains Y are discussed. (shrink)

In this short article I proudly present ARSECOG: The Ariel Rubinstein Seminar Comment Generator. This is an AI program in the style of ELIZA. However, instead of simulating a psychotherapist, it simulates the eminent economist Ariel Rubinstein. Prof. Rubinstein is renowned for his insightful and penetrating comments during research seminars. I am sure many of us, who envy his capabilities in this department, would find a program such as ARSECOG quite useful.

This paper discusses a common criticism of economic models that depart from the standard rational-choice paradigm - namely, that the phenomena addressed by such models can be???rationalized??? by some standard model. I criticize this criterion for evaluating bounded-rationality models. Using a market model with boundedly rational consumers due to Spiegler as a test case, I show that even when it initially appears that a bounded-rationality model can be rationalized by a standard model, rationalizing models tend to come with unwarranted???extra baggage???. (...) I conclude that we should impose a greater burden of proof on rationalizations that are offered in refutation of bounded-rationality models. (shrink)