In this paper I draw from Martin Heidegger’s phenomenology of the 1920s to outline some basic features of his theory of intentionality that I believe have not been fully appreciated or utilized, and that allow for both novel and fruitful interventions in questions about meaning, the relationship between mind and the world, and epistemic justification, principally as they appear in John McDowell’s synoptic project in Mind and World. I argue that while elements of McDowell’s picture are ultimately unsatisfying and problematic, (...) much of his conceptual framework can and should be put into dialogue with Heidegger’s, and that in so doing we make available powerful resources for amending the McDowellian account. Moreover, these emendations have attractive implications for his distinctive desiderata. In particular, they provide original conceptions of normativity’s place in nature, of the boundaries of the space of reasons, and of the relationship between the answerability of thought both to the world and to human beings as a rational community. (shrink)

Bounded rationality gets a bad rap in epistemology. It is argued that theories of bounded rationality are overly context‐sensitive; conventionalist; or dependent on ordinary language (Carr, 2022; Pasnau, 2013). In this paper, I have three aims. The first is to set out and motivate an approach to bounded rationality in epistemology inspired by traditional theories of bounded rationality in cognitive science. My second aim is to show how this approach can answer recent (...) challenges raised for theories of bounded rationality. My third aim is to clarify the role of rational ideals in bounded rationality. (shrink)

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.

Is there such a thing as bounded rationality? 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 bounded rationality 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)

Research on bounded rationality 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)

Epistemic reliabilism holds that a belief is justified if and only if it is produced by a reliable or truth-conducive process. I argue that reliabilism offers an epistemology for bounded rationality. This latter concept refers to normative and descriptive accounts of real-world reasoning instead of some ideal reasoning. However, as initially formulated, reliabilism involves an absolute, context-independent assessment of rationality that does not do justice to the fact that several processes are reliable in some reasoning environments but (...) not in others, as is widely reported in the cognitive sciences literature. I consider possible solutions to this problem. Resorting to ‘normality reliabilism’, a variant of the theory, is one; but I find it insufficient. Therefore, in addition, I propose to relativise the reliability assessment to reasoning environments. This novel version of reliabilism fits bounded rationality better than the original one does. (shrink)

The notion of bounded rationality has recently gained considerable popularity in the behavioural and social sciences. This article surveys the different usages of the term, in particular the way ‘anomalosus’ behavioural phenomena are elicited, how these phenomena are incorporated in model building, and what sort of new theories of behaviour have been developed to account for bounded rationality in choice and in deliberation. It also discusses the normative relevance of bounded rationality, in particular as (...) a justifier of non‐standard reasoning and deliberation heuristics. For each of these usages, the overview discusses the central methodological problems. (shrink)

Simple game experiments of the reward allocation, dictator and ultimatum type are used to demonstrate that true explanations of social phenomena cannot conceivably be derived in terms of the perfect rationality concept underlying neo-classical economics. We explore in some depth, if speculatively, how experimental game theory might bring us closer to a new synthesis or at least the nucleus of a general theory of ‘games and boundedly rational economic behavior’ with enhanced explanatory power.

This paper presents an axiomatic framework for the priority heuristic, a model of bounded rationality in Selten’s (in: Gigerenzer and Selten (eds.) Bounded rationality: 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 (Luce, Econometrica 24:178–191, 1956), 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)

The bounded rationality 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 l’utilité espérée. La TRL a l’avantage de tenir compte notamment du fait que l’information est généralement coûteuse, corrigeant ainsi l’irréalisme 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 l’on montre qu’en abandonnant certains de ces postulats, l’on définit un modèle, le MRG qui, lui, peut prétendre à la généralité. C’est celui qui est utilisé naturellement par les analyses sociologiques qui ses sont imposées. (shrink)

My aim in this paper is to develop a unified solution to two paradoxes of bounded rationality. The first is the regress problem that incorporating cognitive bounds into models of rational decisionmaking generates a regress of higher-order decision problems. The second is the problem of rational irrationality: it sometimes seems rational for bounded agents to act irrationally on the basis of rational deliberation. I review two strategies which have been brought to bear on these problems: the way (...) of weakening which responds by weakening rational norms, and the way of indirection which responds by letting the rationality of behavior be determined by the rationality of the deliberative processes which produced it. Then I propose and defend a third way to confront the paradoxes: the way of level separation. (shrink)

In this paper I will present an analysis of the impact that the notion of “bounded rationality”, 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)

We consider several puzzles of bounded rationality. 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 bounded rationality. 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)

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 (...) bounded rationality, 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)

The notion of “bounded rationality” was introduced by Simon as an appropriate framework for explaining how agents reason and make decisions in accordance with their computational limitations and the characteristics of the environments in which they exist (seen metaphorically as two complementary scissor blades).We elaborate on how bounded rationality is usually conceived in psychology and on its relationship with logic. We focus on the relationship between heuristics and some non-monotonic logical systems. These two categories of cognitive (...) tools share fundamental features. As a step further, we show that in some cases heuristics themselves can be formalized from this logic perspective. We have therefore two main aims: on the one hand, to demonstrate the relationship between the bounded rationality programme and logic, understood in a broad sense; on the other hand, to provide logical tools of analysis of already known heuristics. This may lead to results such as the characterization of fast and frugal binary trees in terms of their associated logic program here provided. (shrink)

This is a survey of bounded rationality, 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.

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 bounded rationality, 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)

Humans exhibit the remarkable ability to solve complex, multi-step problems despite their limited capacity for search. We review the standard theory of problem solving, which posits that heuristic guidance makes this possible, but we also note that most studies have emphasized the role of domain-specific heuristics, which are not available for unfamiliar tasks, over more general ones. We describe FPS, a flexible architecture for problem solving that supports a variety of different strategies and heuristics, and we report its use in (...) an experiment that studies the effectiveness of two domain-independent criteria. The results suggest that such heuristics can make problem solving far more tractable, and they are generally consistent with our claim that their use offsets the drawbacks of bounded rationality. (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 bounded rationality 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 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. (shrink)

In this paper we question the hypothesis of bounded rationality against full rationality in the context of job changing behavior, via simple econometric explorations on microdata drawn from Worker Histories Italian Panel (WHIP) and Sample of Integrated Labor Market Biographies (SIAB). 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’ (both voluntary and involuntary) 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 bounded rationality of the movers. (shrink)

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)

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 bounded rationality. It surveys possible solutions, none of which are found to be attractive. And it concludes by discussing the difficulties that the problem of bounded rationality poses for the welfarist program for legal scholarship presented by Louis Kaplow and Steven Shavell in their book, Fairness versus Welfare. (shrink)

Álvarez J.F. (2016) Conflicts, Bounded Rationality 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 bounded rationality 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)

While game theory has been transformative for decision making, the assumptions made can be overly restrictive in certain instances. In this work, we investigate some of the underlying assumptions of rationality, such as mutual consistency and best response, and consider ways to relax these assumptions using concepts from level-k reasoning and quantal response equilibrium (QRE) respectively. Specifically, we propose an information-theoretic two-parameter model called the quantal hierarchy model, which can relax both mutual consistency and best response while still approximating (...) level-k, QRE, or typical Nash equilibrium behavior in the limiting cases. The model is based on a recursive form of the variational free energy principle, representing higher-order reasoning as (pseudo) sequential decision-making in extensive-form game tree. This representation enables us to treat simultaneous games in a similar manner to sequential games, where reasoning resources deplete throughout the game-tree. Bounds in player processing abilities are captured as information costs, where future branches of reasoning are discounted, implying a hierarchy of players where lower-level players have fewer processing resources. We demonstrate the effectiveness of the quantal hierarchy model in several canonical economic games, both simultaneous and sequential, using out-of-sample modelling. (shrink)

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)

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)

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.

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 bounded rationality (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)

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.

Herbert Simon's renowned theory of bounded rationality is principally interested in cognitive constraints and environmental factors and influences which prevent people from thinking or behaving according to formal rationality. Simon's theory has been expanded in numerous directions and taken up by various disciplines with an interest in how humans think and behave. This includes philosophy, psychology, neurocognitive sciences, economics, political science, sociology, management, and organization studies. The Routledge Handbook of Bounded Rationality draws together an international (...) team of leading experts to survey the recent literature and the latest developments in these related fields. The chapters feature entries on key behavioural phenomena, including reasoning, judgement, decision making, uncertainty, risk, heuristics and biases, and fast and frugal heuristics. The text also examines current ideas such as fast and slow thinking, nudge, ecological rationality, evolutionary psychology, embodied cognition, and neurophilosophy. Overall, the volume serves to provide the most complete state-of-the-art collection on bounded rationality available. This book is essential reading for students and scholars of economics, psychology, neurocognitive sciences, political sciences, and philosophy. (shrink)

The modelling of bounded rationality 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 bounded rationality? Second, what kind of modelling desiderata do the respective approaches focus on? And third, how do (...) the respective approaches justify the normative validity of bounded rationality? To broaden the picture, we not only discusss the five contributions of this issue, but also include relevant positions from the extant literature. (shrink)

A generalization of the standard n-person game is presented, with flexible information requirements suitable for players constrained by bounded rationality. 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)

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)

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)

What is the nature of moral behavior? According to the study of bounded rationality, 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)

Book review - Bounded Rationality: Heuristics, Judgement, and Public Policy Sanjit Dhami and Cass R. Sunstein. MIT Press, 2022, 533 pp.

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)

One of the main challenges that the arriving paradigm of Internet of Things brings to society is providing and securing individual privacy. There are lots of obstacles which prevents us from successfully confronting such a challenge. In this paper we are going to deal with one such obstacle, and that is the bounded rationality of humans as participants in the environment of Internet of Things. We argue that the ethical approach to the vision of the Internet of Things (...) has to include the notion of bounded rationality. Bounded rationality of users impedes the possibility of giving informed consent. Informed consent is required when getting permission for collecting and using somebody’s personal information. Lastly, we discuss the need for a paternalistic approach of maximum possible default privacy settings without asking for consent, given the seriousness of all potential risks. (shrink)

After having explained why economics introduced utility functions and later the axioms about behaviour in a risky environment, the paper examines the interest for microeco-nomics of the concept of bounded rationality. It starts from a simple model of the labour market on which agents scarch and adapt their demands, contributing unconsciously to the emergence of a unique price. More complex models are thereafter introduced, which enables to draw a picture of the variety of possible trajectories in a dynamic (...) microeco-nomic system. This approach enables to enlarge microeconomics and to explain numerous facts poorly taken into account in the traditional presentations.Après avoir rappelé pourquoi la science économique avait introduit les fonctions d’utilité puis l’axiomatique des comportements en face du risque, l’article examine l’apport en microéco-nomie du concept de rationalité limitée. Il le fait à partir d’un modèle simple du marché du travail où les agents cherchent, et adaptent leurs exigences, contribuant, sous certaines hypothèses et sans en avoir conscience, à l’émergence d’un prix unique. Des modèles plus complexes sont ensuite examinés, ce qui permet de dresser un tableau de la variété des trajectoires possibles dans un système microéconomique dynamique. Cette approche permet d’élargir la théorie microéconomique en rendant compte de nombreux faits mal insérés dans la présentation traditionnelle. (shrink)

From April 8th to 10th 2013, the Herbert Simon Society held its first General Conference in New York. About fifty researchers from different countries and working in different areas attended the event. The conference focused on three topics which were identified as particularly relevant in the development of Simonian thought: duality of mind, creativity and alternative theories to rational expectations. A first Herbert Simon Honorary Lecture by Gerd Gigerenzer opened the conference. Gerg Gigerenzer was later elected as Chairman of the (...) Herbert Simon Society. Joseph Stiglitz closed the conference with the second Herbert Simon Honorary Lecture.The Herbert A. Simon Society brings together economists, social and cognitive scientists engaged in critical issues such as bounded rationality, problem solving, simulation of human thought and creativity. In particular, it gathers some of the most important economists who try to reformulate economic theory by starting from some of the non-neoclassi. (shrink)

The standard model of knowledge, \documentclass[12pt]{minimal} \usepackage{amsmath} \usepackage{wasysym} \usepackage{amsfonts} \usepackage{amssymb} \usepackage{amsbsy} \usepackage{mathrsfs} \usepackage{upgreek} \setlength{\oddsidemargin}{-69pt} \begin{document}$$$$\end{document}, consists of state space, Ω\documentclass[12pt]{minimal} \usepackage{amsmath} \usepackage{wasysym} \usepackage{amsfonts} \usepackage{amssymb} \usepackage{amsbsy} \usepackage{mathrsfs} \usepackage{upgreek} \setlength{\oddsidemargin}{-69pt} \begin{document}$$\varOmega $$\end{document}, and possibility correspondence, P\documentclass[12pt]{minimal} \usepackage{amsmath} \usepackage{wasysym} \usepackage{amsfonts} \usepackage{amssymb} \usepackage{amsbsy} \usepackage{mathrsfs} \usepackage{upgreek} \setlength{\oddsidemargin}{-69pt} \begin{document}$$P$$\end{document}. Usually, it is assumed that P\documentclass[12pt]{minimal} \usepackage{amsmath} \usepackage{wasysym} \usepackage{amsfonts} \usepackage{amssymb} \usepackage{amsbsy} \usepackage{mathrsfs} \usepackage{upgreek} \setlength{\oddsidemargin}{-69pt} \begin{document}$$P$$\end{document} satisfies all knowledge axioms. Violating at least one of these axioms is defined as epistemic bounded rationality. If this happens, a (...) researcher may try to look for another model, \documentclass[12pt]{minimal} \usepackage{amsmath} \usepackage{wasysym} \usepackage{amsfonts} \usepackage{amssymb} \usepackage{amsbsy} \usepackage{mathrsfs} \usepackage{upgreek} \setlength{\oddsidemargin}{-69pt} \begin{document}$$$$\end{document}, which generates the initial model, \documentclass[12pt]{minimal} \usepackage{amsmath} \usepackage{wasysym} \usepackage{amsfonts} \usepackage{amssymb} \usepackage{amsbsy} \usepackage{mathrsfs} \usepackage{upgreek} \setlength{\oddsidemargin}{-69pt} \begin{document}$$$$\end{document}, while satisfying all knowledge axioms. Rationalizing EBR means that the researcher finds such a model. I determine when rationalization of EBR is possible. I also investigate when a model, \documentclass[12pt]{minimal} \usepackage{amsmath} \usepackage{wasysym} \usepackage{amsfonts} \usepackage{amssymb} \usepackage{amsbsy} \usepackage{mathrsfs} \usepackage{upgreek} \setlength{\oddsidemargin}{-69pt} \begin{document}$$$$\end{document}, which satisfies all knowledge axioms, generates a model, \documentclass[12pt]{minimal} \usepackage{amsmath} \usepackage{wasysym} \usepackage{amsfonts} \usepackage{amssymb} \usepackage{amsbsy} \usepackage{mathrsfs} \usepackage{upgreek} \setlength{\oddsidemargin}{-69pt} \begin{document}$$$$\end{document}, which satisfies these axioms as well. (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.