Skip to main content
×
Home

‘BUT CAN'T WE GET THE SAME THING WITH A STANDARD MODEL?’ RATIONALIZING BOUNDED-RATIONALITY MODELS

  • Ran Spiegler (a1)
Abstract

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 (2006a) 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.

Copyright
References
Hide All
Baliga S. and Ely J. 2009. Mnemonics: The Sunk Cost Fallacy as a Memory Kludge. Northwestern University, mimeo.
Bernheim D. 2009. On the potential of neuroeconomics: a sober (but hopeful) appraisal. American Economic Journal: Microeconomics 1 (2): 141.
Binmore K. and Shaked A. 2010. Experimental Economics: Where Next? Journal of Economic Behaviour and Organization 3 (1): 87100.
Caplin A. and Schotter A. (eds.) 2008. Perspectives on the future of economics: positive and normative foundations. Handbook of Economic Methodology 1. Oxford: Oxford University Press.
Compte O. and Postelwaite A. 2005. Confidence-enhanced performance. American Economic Review 94: 15361557.
Dekel E. and Lipman B. 2009. How (not) to do Decision Theory. Annual Review of Economics, forthcoming.
Friedman M. 1953. Essays in Positive Economics. Chicago: Chicago University Press.
Fudenberg D. 2006. Advancing beyond advances in behavioural economics, Journal of Economic Literature 44: 694711.
Kamenica E. 2008. Contextual inference in markets: on the informational content of product lines. American Economic Review 98: 21272149.
Lucas R. 1976. Econometric policy evaluation: a critique. In Carnegie-Rochester Conference Series on Public Policy Vol. 1, pp. 1946. Amsterdam: Elsevier.
Rabin M. 2002. A perspective on psychology and economics. European Economic Review 46: 657685.
Rubinstein A. 2006. Dilemmas of an economic theorist. Econometrica 74: 865883.
Samuelson L. 2001. Analogies, adaptations, and anomalies. Journal of Economic Theory 97: 320367.
Spiegler R. 2006a. The Market for Quacks. Review of Economic Studies 73: 11131131.
Spiegler R. 2006b. Competition over agents with boundedly rational expectations, Theoretical Economics 1: 207231.
Recommend this journal

Email your librarian or administrator to recommend adding this journal to your organisation's collection.

Economics & Philosophy
  • ISSN: 0266-2671
  • EISSN: 1474-0028
  • URL: /core/journals/economics-and-philosophy
Please enter your name
Please enter a valid email address
Who would you like to send this to? *
×

Metrics

Full text views

Total number of HTML views: 7
Total number of PDF views: 42 *
Loading metrics...

Abstract views

Total abstract views: 268 *
Loading metrics...

* Views captured on Cambridge Core between September 2016 - 21st November 2017. This data will be updated every 24 hours.