Spiegler, Ran (2010): "But Can't we Get the Same Thing with a Standard Model?" Rationalizing Bounded-Rationality Models.
Download (194Kb) | Preview
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, the 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 such models.
|Item Type:||MPRA Paper|
|Original Title:||"But Can't we Get the Same Thing with a Standard Model?" Rationalizing Bounded-Rationality Models|
|Keywords:||Bounded rationality, methodology, theory selection, rationalizations|
|Subjects:||D - Microeconomics > D0 - General > D03 - Behavioral Economics; Underlying Principles
B - History of Economic Thought, Methodology, and Heterodox Approaches > B4 - Economic Methodology > B49 - Other
|Depositing User:||ran spiegler|
|Date Deposited:||16. Mar 2010 15:15|
|Last Modified:||12. Feb 2013 18:22|
Baliga, S. and J. Ely (2009), "Mnemonics: The Sunk Cost Fallacy as a Memory Kludge", Northwestern University, mimeo.
Bernheim, D. (2009), "On the Potential of Neuroeconomics: A Sober (but Hopeful) Appraisal", American Economic Journal: Microeconomics 1 (2), 1-41.
Binmore, K. and A. Shaked (2010), "Experimental Economics: Where Next?" Journal of Economic Behavior & Organization 3 (1), 87-100.
Caplin A. and A. Schotter, eds. (2008), Perspectives on the Future of Economics: Positive and Normative Foundations, Handbook of Economic Methodology, Vol. 1, Oxford University Press.
Compte, O. and A. Postelwaite (2005), "Confidence-Enhanced Performance", American Economic Review 94, 1536-1557.
Dekel E. and B. Lipman (2009), "How (Not) to Do Decision Theory", Annual Review of Economics, forthcoming.
Kamenica, E. (2008), "Contextual Inference in Markets: On the Informational Content of Product Lines", American Economic Review 98, 2127-2149.
Lucas, R. (1976), "Econometric Policy Evaluation: A Critique", in Carnegie-Rochester conference series on public policy, Volume 1, pp. 19-46, Elsevier.
Rabin, M. (2002), "A Perspective on Psychology and Economics", European Economic Review 46, 657-685.
Rubinstein, A. (2006), "Dilemmas of An Economic Theorist", Econometrica 74, 865-883.
Sameulson, L. (2001), "Analogies, Adaptations, and Anomalies," Journal of Economic Theory 97, 320-367.
Spiegler, R. (2006a), "The Market for Quacks", Review of Economic Studies 73, 1113-1131.
Spiegler, R. (2006b), "Competition Over Agents with Boundedly Rational Expectations", Theoretical Economics 1, 207-231.