A Model of Satisficing Behaviour

Rajiv Sarin () and Hyun Chang Yi ()
Additional contact information
Rajiv Sarin: Department of Economics, University of Exeter
Hyun Chang Yi: Economic Research Institute, Bank of Korea

No 2020-21, Working Papers from Economic Research Institute, Bank of Korea

Abstract: We build a model of satisficing behaviour. We explicitly introduce the value the decision maker “expects” from an action, where this expectation is adaptively formed. This valuation of an action is differentiated from her satisficing level which is taken to be the value the agent “expects” from her outside option. If the valuation is higher than her satisficing level she continues with the current action, updating her valuation of the action. If she receives a low payoff and her valuation of the action falls below her satisficing level, she updates her satisficing level downward the valuation and explores an alternative action. And, she occasionally experiences shocks on her satisficing level and choice of action. We show that in individual decision problems, satisficing behaviour results in cautious, maximin choice. In games like the Prisoner’s Dilemma and Stag Hunt, they in the long run play either cooperative or defective outcomes and in a class of coordination games, they coordinate on Pareto optimal outcomes.

Keywords: Satisficing Behaviour; Individual Decision Problem; Non-cooperative Game; Coordination Game; Markov Process; Invariant Distribution (search for similar items in EconPapers)
JEL-codes: C72 D83 (search for similar items in EconPapers)
Pages: 50 pages
Date: 2020-10-13
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.bok.or.kr/ucms/cmmn/file/fileDown.do?m ... 00000019981&fileSn=1 Working Paper, 2020 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bok:wpaper:2021

Access Statistics for this paper

More papers in Working Papers from Economic Research Institute, Bank of Korea Contact information at EDIRC.
Bibliographic data for series maintained by Economic Research Institute ().