Bounded rationality and adaptive agents in economic modeling

ABSTRACT

Traditional economic theory sees human economic decisions as rational choices of action to achieve maximum utility. However, economic reality shows that people often behave in ways different from that ideal: actions are not always determined rationally; often they are influenced by other factors, such as chance and tradition. In order to describe the behaviour of economic agents in the real world, we take irrationality and adaptation into account: we present work in progress on a market simulation that shows the effects of partly irrational and adaptive consumer buying decisions on the course of action of entrepreneurs.

REFERENCES

• 1: Brian Arthur. Designing economic agents that act like human agents: a behavioural approach to bounded rationality. AEA Papers and Proceedings, 81(2), May 1991.
• 2: Wilhelm Lorenz. Gewinnmaximierung du:rch versuch und irrtum - eine simulation. WiSt- Inforum, September 1991.
• 3: John D. Sterman, Modeling managerial behavior: misperceptions of feedback in a dynamic decision making experiment, Management Science, v.35 n.3, p.321-339, March 1989 [doi>10.1287/mnsc.35.3.321]

INDEX TERMS

Primary Classification:
  I. Computing Methodologies
  I.2 ARTIFICIAL INTELLIGENCE
      I.2.0 General
          Subjects: Cognitive simulation

Additional Classification:
  H. Information Systems
  H.1 MODELS AND PRINCIPLES
      H.1.2 User/Machine Systems
          Subjects: Human factors

  I. Computing Methodologies
  I.6 SIMULATION AND MODELING

General Terms:
Human Factors, Languages, Theory

Keywords:
adaptive agents, bounded rationality, economic modelling, economic simulation