Bounded Rationality and Retrospection

David M. Kreps

in Game Theory and Economic Modelling

Published in print October 1990 | ISBN: 9780198283812
Published online November 2003 | e-ISBN: 9780191596568 | DOI:

Series: Clarendon Lectures in Economics

 Bounded Rationality and Retrospection

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Argues that many of the weaknesses of game theory arise from weaknesses in how economists model individual (dynamic) behaviour: with hyper‐rational and forward‐looking, farsighted individuals. Progress is likely to be made by re‐examining our models of behaviour, incorporating bounds to individual rationality and modelling individuals who are more retrospective, learning adaptively from the past.

Keywords: adaptive learning; behavioural modelling; bounded rationality; dynamic choice; game theory; hyper‐rationality; retrospection

Chapter.  17572 words.  Illustrated.

Subjects: Microeconomics

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