The notion of bounded rationality was initiated in the 1950s by Herbert Simon; only recently has it influenced mainstream economics. In this book, Ariel Rubinstein defines models of bounded rationality as those in which elements of the process of choice are explicitly embedded. The book focuses on the challenges of modeling bounded rationality, rather than on substantial economic implications.

In the first part of the book, the author considers the modeling of choice. After discussing some psychological findings, he proceeds to the modeling of procedural rationality, knowledge, memory, the choice of what to know, and group decisions.

In the second part, he discusses the fundamental difficulties of modeling bounded rationality in games. He begins with the modeling of a game with procedural rational players and then surveys repeated games with complexity considerations. He ends with a discussion of computability constraints in games. The final chapter includes a critique by Herbert Simon of the author's methodology and the author's response.

The Zeuthen Lecture Book series is sponsored by the Institute of Economics at the University of Copenhagen.

About the Author
Ariel Rubinstein is Professor of Economics at Tel Aviv University and at Princeton University.

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Paperback: 208 pages
Author: Ariel Rubinstein
Publisher: The MIT Press (December 26, 1997)
Language: English
ISBN-10: 0262681005
ISBN-13: 978-0262681001

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Preface

This book is a collection of notes I have developed over the last eight years and presented in courses and lectures at the London School of Economics (1989), Hebrew University (1989), University of Pennsylvania (1990), Columbia University (1991), Princeton University (1992, 1995), University of Oslo (1994), Paris X (1995), Oberwesel (1995), New York University (1996), and my home university, Tel Aviv (1990, 1994). I completed writing the book while I was a visiting scholar at the Russell Sage Foundation, New York. A preliminary version was presented as the Core Lectures at Louvain-La-Neuve in October 1995; this version served as the basis for my Zeuthen Lectures at the University of Copenhagen in December 1996.

The book provides potential material for a one-term graduate course. The choice of material is highly subjective. Bibliographic notes appear at the end of each chapter. The projects that follow those notes contain speculative material and ideas that the reader should consider with caution.

My thanks to my friends Bart Lipman and Martin Osborne for their detailed comments and encouragement. I am grateful to all those students, especially Dana Heller, Rani Spigeler, and Ehud Yampuler, who commented on drafts of several chapters, to Nina Reshef, who helped edit the English-language manuscript, to Dana Heller, who prepared the index, and to Gregory McNamee who copyedited the manuscript.

Series Foreword

The Zeuthen Lectures offer a forum for leading scholars to develop and synthesize novel results in theoretical and applied economics.

They aim to present advances in knowledge in a form accessible to a wide audience of economists and advanced students of economics. The choice of topics will range from abstract theorizing to economic history. Regardless of the topic, the emphasis in the lecture series will be on originality and relevance. The Zeuthen Lectures are organized by the Institute of Economics, University of Copenhagen.

The lecture series is named after Frederik Zeuthen, a former professor at the Institute of Economics, and it is only appropriate that the first Zeuthen lecturer is Ariel Rubinstein, who has refined and developed a research program to which Frederik Zeuthen made important initial contributions. Karl Gunnar Persson

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