Friday 4th April
3.30pm Eagle House, Meeting Room
Professor Steven Kimbrough, Wharton
Alternatives to Ideal Rationality
The assumption of ideal rationality (approximately full knowledge and preferences consistent with utility theory) suffuses game theory and economic modeling. That the requirements for ideal rationality are unrealistic has always been recognized. An argument often heard in support of using ideal rationality in game and economic models relies on the claim that ideal rationality provides a unique formulation, while there are an indefinite number of formulations, none of them preferred, for non-ideal rationality. This talk is in two parts. In part 1, analytic results are presented for oligopoly modeling that demonstrate a form of incoherence in the program of modeling with ideal rationality. Part 2 presents a positive account of alternatives to ideal rationality. Drawing upon computational results, we argue for, among other things, the importance of minimal rationality assumptions in game and economic modeling.