Exponential Satisficing

Christopher Tyson

American Economic Journal: Microeconomics, 2021, vol. 13, issue 2, 439-67

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-codes: D01 D80 D90 (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (4)

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DOI: 10.1257/mic.20180301

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