An Approach to Bounded Rationality

Eli Ben-Sasson, Adam Tauman Kalai and Ehud Kalai

No 1439, Discussion Papers from Northwestern University, Center for Mathematical Studies in Economics and Management Science

Abstract: A central question in game theory and artificial intelligence is how a rational agent should behave in a complex environment, given that it cannot perform unbounded computations. We study strategic aspects of this question by formulating a simple model of a game with additional costs (computational or otherwise) for each strategy. First we connect this to zero-sum games, proving a counter-intuitive generalization of the classic min-max theorem to zero-sum games with the addition of strategy costs. We then show that potential games with strategy costs remain potential games. Both zero-sum and potential games with strategy costs maintain a very appealing property: simple learning dynamics converge to equilibrium.

Keywords: bounded rationality; zero sum games; potential games; strategic complexity. (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cbe, nep-evo and nep-gth
Date: 2006-11
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