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Exponential Satisficing†

Exponential Satisficing† AbstractWe 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. (JEL D01, D80, D90) http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png American Economic Journal: Microeconomics American Economic Association

Exponential Satisficing†

Exponential Satisficing†

American Economic Journal: Microeconomics , Volume 13 (2) – May 1, 2021

Abstract

AbstractWe 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. (JEL D01, D80, D90)

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Publisher
American Economic Association
Copyright
Copyright © 2021 © American Economic Association
ISSN
1945-7685
DOI
10.1257/mic.20180301
Publisher site
See Article on Publisher Site

Abstract

AbstractWe 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. (JEL D01, D80, D90)

Journal

American Economic Journal: MicroeconomicsAmerican Economic Association

Published: May 1, 2021

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