A plausible Decision Heuristics Model: Fallibility of human judgment as an endogenous problem

Carlos Sáenz-Royo ()
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Carlos Sáenz-Royo: LEE and Department of Economics, Universitat Jaume I, Castellón, Spain

No 2017/04, Working Papers from Economics Department, Universitat Jaume I, Castellón (Spain)

Abstract: This study meditates about mental heuristic rules as a representation of bounded rationality in individual decision making. The heuristic process presented here represents simultaneously limited computational capacity, the capacity to determine relevant information in complex contexts around beliefs, and time as an endogenous part of decision. The mathematical model of this heuristic rule correlates to the fallibility of the agent depending on the relative outcome of the alternatives in exogenous terms; the availability of only part of the information regarding the alternatives concert by beliefs; and the amount of time the decision maker is willing to spend on a decision based on previous experience and knowing that there is a tradeoff between time and fallibility. The resulting mathematical model can be applied to many disciplines like such as opinion models, game theory, the comparison of systems of distribution of authority, and fields that utilize the technique of agent-based models (ABM) that use individual behavior to study the macroscopic results of interactions.

Keywords: Bounded rationality; individual decisions making; heuristic; fallibility; modelling decisions; ABM. (search for similar items in EconPapers)
JEL-codes: A14 C00 D03 Z13 (search for similar items in EconPapers)
Pages: 49 pages
Date: 2017
New Economics Papers: this item is included in nep-cbe, nep-cmp, nep-evo, nep-hme, nep-ore and nep-upt
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Persistent link: https://EconPapers.repec.org/RePEc:jau:wpaper:2017/04

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