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‘BUT CAN'T WE GET THE SAME THING WITH A STANDARD MODEL?’ RATIONALIZING BOUNDED-RATIONALITY MODELS

Published online by Cambridge University Press:  18 January 2011

Ran Spiegler
Ran Spiegler*
Affiliation:
Tel Aviv University and University College London.
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Abstract

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, 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 bounded-rationality models.

Type
Research Article
Information
Economics & Philosophy , Volume 27 , Issue 1 , March 2011 , pp. 23 - 43
Copyright
Copyright © Cambridge University Press 2011

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Footnotes

I thank Ayala Arad, Eddie Dekel, Yves Guéron, Barton Lipman, Ariel Rubinstein, participants at the 2009 San Sebastian Summer School in Economics and Philosophy and the 2010 Behavioral Economics conference at the Hebrew University, and the editor of this journal, for their comments. Financial support from the European Research Council, Grant no. 230251, as well as the ESRC (UK), is gratefully acknowledged.

References

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