Bounded Reasoning: Rationality or Cognition (joint with Amanda Friedenberg and Terri Kneeland)

Speaker: Willemien Kets

University of Oxford

This event is part of our Economic Theory Lunchtime Workshop series

Bounded reasoning about rationality can have important implications for behavior. These bounds are typically viewed as an artifact of limits in the ability to engage in interactive reasoning, i.e., to reason through “I think, you think, I think, etc ..."  However, in principle, these bounds need not be determined by limits in ability. This paper develops a novel identification strategy to show that bounded reasoning about rationality is not determined by limitations in ability. It goes on to show that non-degenerate beliefs about rationality can be an important determinant of behavior. This has important implications for out-of-sample predictions.

The Economic Theory Lunchtime Workshops are convened by Meg Meyer.