A Non-Bayesian Approach to (Un)Bounded Rationality
7 Pages Posted: 18 Oct 2007
Date Written: July 6, 2007
Can one deﬁne and test the hypothesis of (un)bounded rationality in stochastic choice tasks without endorsing Bayesianism? Similar to the state speciﬁcity of assets, we rely on state-speciﬁc goal formation. In a given choice task, the list of state-speciﬁc goal levels is optimal if one cannot increase the goal level for one state without having to decrease that for other states. We show that this allows to relate optimality more easily to bounded rationality where we interpret goal levels as aspirations. If for the latter there exist choices satisfying all state-speciﬁc aspirations and if one such choice is used, we speak of satisficing which may or may not be optimal.
Keywords: satisficing, bounded rationality, optimality
JEL Classification: B4, D81, D10
Suggested Citation: Suggested Citation
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By Werner Güth