Year: 2021
Type: article
Abstract: We propose the exponential satisficing model of boundedly rational decision-making, a general-purpose tool designed for use in typical microeconomic applications. The model posits that the preferences perceived and acted upon by the agent are a stochastic coarsening of his or her true, welfare-significant preferences. The decision-maker’s perceptual capabilities are controlled by a preference resolution parameter, which smoothly varies the impact of cognitive constraints on choice. To demonstrate the implementation of the model, it is applied to duopolistic price competition with satisficing consumers and to normal-form games with satisficing players. (JEL D01, D80, D90)
DOI: 10.1257/mic.20180301
Author: Christopher J. Tyson
Institution: Queen Mary University of London
Language: English
Subfield: General Decision Sciences
Field: Decision Sciences
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W4243137760