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Axiomatizing bounded rationality: the priority heuristic

Drechsler, Mareile (2014) Axiomatizing bounded rationality: the priority heuristic. Theory and Decision, 77 (2). pp. 183-196. ISSN 0040-5833

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Identification Number: 10.1007/s11238-013-9393-0

Abstract

This paper presents an axiomatic framework for the priority heuristic, a model of bounded rationality in Selten’s (in: Gigerenzer and Selten (eds.) Bounded rationality: the adaptive toolbox, 2001) spirit of using empirical evidence on heuristics. The priority heuristic predicts actual human choices between risky gambles well. It implies violations of expected utility theory such as common consequence effects, common ratio effects, the fourfold pattern of risk taking and the reflection effect. We present an axiomatization of a parameterized version of the heuristic which generalizes the heuristic in order to account for individual differences and inconsistencies. The axiomatization uses semiorders (Luce, Econometrica 24:178–191, 1956), which have an intransitive indifference part and a transitive strict preference component. The axiomatization suggests new testable predictions of the priority heuristic and makes it easier for theorists to study the relation between heuristics and other axiomatic theories such as cumulative prospect theory.

Item Type: Article
Official URL: http://link.springer.com/journal/11238
Additional Information: © 2013 Springer Science+Business Media New York
Divisions: Philosophy, Logic and Scientific Method
CPNSS
Subjects: B Philosophy. Psychology. Religion > B Philosophy (General)
Sets: Departments > Philosophy, Logic and Scientific Method
Research centres and groups > Centre for Philosophy of Natural and Social Science (CPNSS)
Date Deposited: 23 Sep 2013 08:58
Last Modified: 20 Jan 2020 05:18
Projects: Grant Number 09-194
Funders: Fonds National de la Recherche Luxembourg
URI: http://eprints.lse.ac.uk/id/eprint/52855

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