Bounded Rationality and Small Worlds

Simon Grant and John Quiggin

No 151187, Risk and Sustainable Management Group Working Papers from University of Queensland, School of Economics

Abstract: We consider conditions under which the representation of the world available to a boundedly rational decision-maker, whose awareness in- creases over time, constitutes an adequate "small world" (in the sense of Savage 1954) for the assessment of a given decision. Equivalently, we consider whether boundedly rational decision-makers who gradu- ally become aware of all relevant contingencies, can pursue a strategy that is sequentially consistent. We derive conditions on beliefs and preferences that yield a separation between the set of propositions of which the boundedly rational decision-maker is aware and those of which she is unaware and show that these conditions are sufficient to ensure sequential consistency.

Keywords: Risk; and; Uncertainty (search for similar items in EconPapers)
Pages: 16
Date: 2008-06-09
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Citations: View citations in EconPapers (5)

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Working Paper: Bounded rationality and small worlds (2008)
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Persistent link: https://EconPapers.repec.org/RePEc:ags:uqsers:151187

DOI: 10.22004/ag.econ.151187

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