An informal argument shows that common knowledge of rationality implies the iterative elimination of strongly dominated strategies. Rationality here means that players do not play strategies that are strongly dominated relative to their knowledge. We formalize and prove this claim. When by rationality we mean that players do not play strategies that are weakly dominated relative to their knowle...

This chapter discusses the concept of bounded rationality as it is understood in the tradition of H.A. Simon. Fundamental problems and theoretical issues are presented, with special emphasis on aspiration adaptation theory. Further remarks concern basic modes of decision behavior (like learning and expectation formation), reasoning, and the connection between bounded rationality and motivation.

An informal argument shows that common knowledge of rationality implies the iterative elimination of strictly dominated strategies. Rationality here means that players do not play strategies that are strictly dominanted relative to their knowledge. We formalize and prove this claim. When by rationality we mean that players do not play strategies that are weakly dominanted relative to their know...

An informal argument shows that common knowledge of rationality implies the iterative elimination of strongly dominated strategies. Rationality here means that players do not play strategies that are strongly dominated relative to their knowledge. We formalize and prove this claim. When by rationality we mean that players do not play strategies that are weakly dominated relative to their knowle...

In this paper we re-consider the theoretical basis for the Lucas Critique from the point of view of Robust Decision Theory. We ...rst emphasise that the Lucas Critique rests on a weak theoretical paradigm in that it fails to consider the motivation for the policy change by the government and hence inconsistently assumes limited rationality by the government. When placed in a proper dynamic gene...