Spiegler, R.; (2010) "But can't we get the same thing with a standard model?" Rationalizing bounded-rationality models. (ELSE Working Papers 370). ESRC Centre for Economic Learning and Social Evolution: London, UK.

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Abstract

This paper discusses a common criticism of economic models that depart from the standard rational-choice paradigm - namely, that the phenomena addressed by such models can be “rationalized” by some standard model. I criticize this criterion for evaluating bounded-rationality models. Using a market model with boundedly rational consumers due to Spiegler (2006a) as a test case, I show that even when it initially appears that a bounded-rationality model can be rationalized by a standard model, the rationalizing models tend to come with unwarranted “extra baggage”. I conclude that we should impose a greater burden of proof on rationalizations that are offered in refutation of such models.

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