Modeling Bounded Rationality


The notion of bounded rationality was initiated in the 1950s by Herbert Simon; only recently has it influenced mainstream economics. In this book, Ariel Rubinstein defines models of bounded rationality as those in which elements of the process of choice are explicitly embedded. The book focuses on the challenges of modeling bounded rationality, rather than on substantial economic implications.

In the first part of the book, the author considers the modeling of choice. After discussing some psychological findings, he proceeds to the modeling of procedural rationality, knowledge, memory, the choice of what to know, and group decisions. In the second part, he discusses the fundamental difficulties of modeling bounded rationality in games. He begins with the modeling of a game with procedural rational players and then surveys repeated games with complexity considerations. He ends with a discussion of computability constraints in games. The final chapter includes a critique by Herbert Simon of the author's methodology and the author's response.

The Zeuthen Lecture Book series is sponsored by the Institute of Economics at the University of Copenhagen.

Table of Contents

  1. Series Foreword
  2. Preface
  3. Introduction
  4. 1. Bounded Rationality in Choice
  5. 2. Modeling Procedural Decision Making
  6. 3. Modeling Knowledge
  7. 4. Modeling Limited Memory
  8. 5. Choosing What to Know
  9. 6. Modeling Complexity In Group Decisions
  10. 7. Modeling Bounded Rationality in Games
  11. 8. Complexity Considerations in Repeated Games
  12. 9. Attempts to Resolve the Finite Horizon Paradoxes
  13. 10. Computability Constraints in Games
  14. 11. Final Thoughts
  15. References
  16. Index