Hostname: page-component-78c5997874-s2hrs Total loading time: 0 Render date: 2024-11-03T08:40:05.613Z Has data issue: false hasContentIssue false
  • English
  • Français

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

Published online by Cambridge University Press:  18 January 2011

Ran Spiegler
Ran Spiegler*
Affiliation:
Tel Aviv University and University College London.
Get access Rights & Permissions [Opens in a new window]

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.

Type
Research Article
Information
Economics & Philosophy , Volume 27 , Issue 1 , March 2011 , pp. 23 - 43
Copyright
Copyright © Cambridge University Press 2011

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

Footnotes

I thank Ayala Arad, Eddie Dekel, Yves Guéron, Barton Lipman, Ariel Rubinstein, participants at the 2009 San Sebastian Summer School in Economics and Philosophy and the 2010 Behavioral Economics conference at the Hebrew University, and the editor of this journal, for their comments. Financial support from the European Research Council, Grant no. 230251, as well as the ESRC (UK), is gratefully acknowledged.

References

REFERENCES

Baliga, S. and Ely, J. 2009. Mnemonics: The Sunk Cost Fallacy as a Memory Kludge. Northwestern University, mimeo.Google Scholar
Bernheim, D. 2009. On the potential of neuroeconomics: a sober (but hopeful) appraisal. American Economic Journal: Microeconomics 1 (2): 1–41.Google Scholar
Binmore, K. and Shaked, A. 2010. Experimental Economics: Where Next? Journal of Economic Behaviour and Organization 3 (1): 87–100.CrossRefGoogle Scholar
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.Google Scholar
Compte, O. and Postelwaite, A. 2005. Confidence-enhanced performance. American Economic Review 94: 1536–1557.CrossRefGoogle Scholar
Dekel, E. and Lipman, B. 2009. How (not) to do Decision Theory. Annual Review of Economics, forthcoming.Google Scholar
Friedman, M. 1953. Essays in Positive Economics. Chicago: Chicago University Press.Google Scholar
Fudenberg, D. 2006. Advancing beyond advances in behavioural economics, Journal of Economic Literature 44: 694–711.CrossRefGoogle Scholar
Kamenica, E. 2008. Contextual inference in markets: on the informational content of product lines. American Economic Review 98: 2127–2149.CrossRefGoogle Scholar
Lucas, R. 1976. Econometric policy evaluation: a critique. In Carnegie-Rochester Conference Series on Public Policy Vol. 1, pp. 19–46. Amsterdam: Elsevier.Google Scholar
Rabin, M. 2002. A perspective on psychology and economics. European Economic Review 46: 657–685.CrossRefGoogle Scholar
Rubinstein, A. 2006. Dilemmas of an economic theorist. Econometrica 74: 865–883.CrossRefGoogle Scholar
Samuelson, L. 2001. Analogies, adaptations, and anomalies. Journal of Economic Theory 97: 320–367.CrossRefGoogle Scholar
Spiegler, R. 2006a. The Market for Quacks. Review of Economic Studies 73: 1113–1131.CrossRefGoogle Scholar
Spiegler, R. 2006b. Competition over agents with boundedly rational expectations, Theoretical Economics 1: 207–231.Google Scholar