ECS1050.08.post

ECS1050.08.post - Unit IV Thinking about Thinking 7/23...

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Unit IV: Thinking about Thinking Choice and Consequence Fair Play Learning to Cooperate Summary and Conclusions 7/23
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Choice and Consequence The Limits of Homo Economicus Bounded Rationality We Play Some Games Tournament Update
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Schelling’s “Errant Economics” “The Intimate Contest for Self-Command” (1984: 57-82) “The Mind as a Consuming Organ” (328-46) The standard model of rational economic man is: The Limits of Homo Economicus Too simple Assumes time consistent preferences Susceptible to self deception and ‘sour grapes’ Is overly consequentialist Ignores ‘labelling’ and ‘framing’ effects
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Schelling’s “Errant Economics” “The Intimate Contest for Self-Command” (1984: 57-82) “The Mind as a Consuming Organ” (328-46) Schelling’s views are not merely critical (negative); his concerns foreshadow much current research on improving the standard model: The Limits of Homo Economicus Behavioral economics/cognitive psychology Artificial Intelligence Learning models: Inductive reasoning
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The Limits of Homo Economicus Experiments in “behavioral economics” have shown people routinely do not behave the way the standard model predicts: reject profitable bargains they think are unfair do not take full advantage of others when they can punish others even when costly to themselves contribute substantially to public goods behave irrationally when they expect others to behave even more irrationally (Camerer, 1997)
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Bounded Rationality Game theory usually assumes “unbounded,” perfect, or “Olympian” rationality (Simon, 1983). Players: have unlimited memory and computational resources. solve complex, interdependent maximization problems – instantaneously! – subject only to the constraint that the other player is also trying to maximize. But observation and experimentation with human subjects tell us that people don’t actually make decisions this way. A more realistic approach would make more modest assumptions: bounded rationality .
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Game theory usually assumes players are deductively rational.
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This note was uploaded on 03/21/2010 for the course ECON 1050 taught by Professor Neugeboren during the Summer '09 term at Harvard.

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ECS1050.08.post - Unit IV Thinking about Thinking 7/23...

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