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Exponential Satisficing

Author

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  • Christopher J. Tyson

Abstract

We propose the exponential satisficing model of boundedly rational decision-making, a general-purpose tool designed for use in typical microeconomic applications. The model posits that the preferences perceived and acted upon by the agent are a stochastic coarsening of his or her true, welfare-significant preferences. The decision-maker's perceptual capabilities are controlled by a preference resolution parameter, which smoothly varies the impact of cognitive constraints on choice. To demonstrate the implementation of the model, it is applied to duopolistic price competition with satisficing consumers and to normal-form games with satisficing players.

Suggested Citation

  • Christopher J. Tyson, 2021. "Exponential Satisficing," American Economic Journal: Microeconomics, American Economic Association, vol. 13(2), pages 439-467, May.
  • Handle: RePEc:aea:aejmic:v:13:y:2021:i:2:p:439-67
    DOI: 10.1257/mic.20180301
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    Cited by:

    1. Alfio Giarlotta & Angelo Petralia, 2024. "Simon’s bounded rationality," Decisions in Economics and Finance, Springer;Associazione per la Matematica, vol. 47(1), pages 327-346, June.
    2. Horan, Sean & Manzini, Paola & Mariotti, Marco, 2022. "When is coarseness not a curse? Comparative statics of the coarse random utility model," Journal of Economic Theory, Elsevier, vol. 202(C).

    More about this item

    JEL classification:

    • D01 - Microeconomics - - General - - - Microeconomic Behavior: Underlying Principles
    • D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General
    • D90 - Microeconomics - - Micro-Based Behavioral Economics - - - General

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