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The Revelation Principle of Bounded Rationality

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  • Eduardo Zambrano

Abstract

In the present paper I introduce the revelation principle of bounded rationality. The principle states that any behavior that a model of bounded rationality exhibits can be implemented as the choice of an agent with preferences and beliefs consistent with Savage-Bayesian rationality. The principle provides a way to unify the two main research programs on the foundations of game theory: the decision-theoretic program and the bounded rationality program. I illustrate how the principle works by providing a solution to the ``El Farol'' problem, a deterministic model of bounded rationality that exhibits stochastic equilibrium behavior. The unification shows that one need not go outside the received theory of Savage-Bayesian decision making to provide adequate foundations for equilibrium analysis.

Suggested Citation

  • Eduardo Zambrano, 1997. "The Revelation Principle of Bounded Rationality," Research in Economics 97-06-060e, Santa Fe Institute.
    • Handle: RePEc:wop:safire:97-06-060e
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    1. The Revelation Principle of Bounded Rationality
      by inobrec in Knowledge Team on 2012-07-26 18:11:19

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    Cited by:

    1. Bruce Edmonds, 1997. "Gossip, Sexual Recombination and the El Farol Bar: modelling the emergence of heterogeneity," Discussion Papers 97-31, Manchester Metropolitan University, Centre for Policy Modelling.
    2. Eduardo Zambrano, 2004. "The Interplay between Analytics and Computation in the Study of Congestion Externalities: The Case of the El Farol Problem," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 6(2), pages 375-395, May.

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