Modeling Bounded Rationality

Ariel Rubinsetin

Information and Uncertainty
Other

Online Book

The basic motivation for studying models of bounded rationality springs from our dissatisfaction with the models that adhere to the "perfect rational man" paradigm. This dissatisfaction results from the strong tension arising from a comparison of the assumptions made by economic modelers about "perfect rationality" with observations about human behavior. This situation would be much less disturbing if we were able to perceive microeconomic models as "miraculous machines" that produce empirical linkages between economic parameters. I doubt that this is the case. I adhere to the view that the main objective of economic theory is to deduce interesting relationships between concepts that appear in our reasoning on interactive situations. Adopting this approach makes it important to examine the plausibility of the assumptions, and not only the conclusions.