Rationality and bounded rationality (Q1378010)

The author enumerates five objections against various economic models. In particular, he argues that there is no unified theory of bounded rationality, but that the development of computer science, complexity theory and so on created an intellectual climate conducive to the development of the theory of bounded rationality. Specially, the preparation of the computer programs has been essential in this direction. The first part discusses the evolutionary approach to optimization (and specifically to game theory) and some of its implications for the idea of bounded rationality such as the development of truly dynamic theories of games and the idea of ``rule rationality''. Part 2 comes with the area of ``trembles'', including equilibrium refinements, ``crazy'' perturbations, failure of common knowledge of rationality. Part 3 deals with players who are modeled as computers. Part 4 discusses the work on the foundations of decision theory that deals with various paradoxa and with results of laboratory experiments by relaxing various of the postulates and so coming up with a weaker theory.