International Economic Review, Forthcoming.
33 Pages Posted: 1 Aug 2013 Last revised: 30 Apr 2015
Date Written: April 13, 2015
We study the strategic advantages of following rules of thumb that bundle different games together (called rule rationality) when this may be observed by one's opponent. We present a model in which the strategic environment determines which kind of rule rationality is adopted by the players. We apply the model to characterize the induced rules and outcomes in various interesting environments. Finally, we show the close relations between act rationality and “Stackelberg stability” (no player can earn from playing first).
Keywords: Bounded Rationality, commitments, categorization, value of information
JEL Classification: C72, D82
Suggested Citation: Suggested Citation