Asymmetric Rationality: Protocol Design and Behavioral Anomalies

Qingmin Liu and Yuyang Miao

Papers from arXiv.org

Abstract: We study how asymmetric rationality in strategic interactions can generate seemingly anomalous patterns of belief updating and behavior. A boundedly rational receiver designs a finite-state decision protocol to learn from a fully rational, privately informed, and biased sender who controls the flow of information. The receiver must allocate scarce memory between learning and incentive provision. We identify a simple class of protocols sufficient for optimal design and show how their structure generates information disengagement, indecision, and polarization. The receiver hesitates before deciding but becomes unresponsive to further evidence afterward. Identical receivers following the same protocol can reach opposing decisions despite receiving the same sequence of signals, with the probability of disagreement remaining bounded away from zero as their payoffs approach the optimum. These behaviors, which might otherwise appear erratic or psychologically driven, arise from the strategic use of limited memory.

Date: 2025-10, Revised 2026-10
New Economics Papers: this item is included in nep-mic
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://arxiv.org/pdf/2510.23951 Latest version (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:arx:papers:2510.23951

Access Statistics for this paper

More papers in Papers from arXiv.org
Bibliographic data for series maintained by arXiv administrators ().