What is Bounded Rationality? Paper prepared for the Dahlem Conference 1999

Reinhard Selten

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Decision-Making and Behavioral Economics Economic Theory and Institutions Experimental Behavioral Economics Studies

Abstract

The paper deals with bounded rationality understood in the tradition of H.A. Simon. Fundamental problems and theoretical issues are discussed. Special emphasis is put on aspiration adaptation theory. Further remarks concern basic models of decision behavior (like learning and expectation formation), reasoning, and the connection between bounded rationality and motivation.

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