Rationality, learning and social norms

Article Abstract:

Economists categorize decision situations under uncertainty into two categories. Decision theory deals with single-person decision problems that only involve exogenous uncertainty. On the other hand, game theory concerns itself with interactive decision problems involving endogenous uncertainty and, if possible, exogenous uncertainty. Much of decision theory and game theory focuses on the normative question, which focuses on rational behavior, to the exclusion of the positive question, which embraces human behavior.

Rational expectations (Economics), Uncertainty

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Bounded rationality and strategic complementarity in a macroeconomic model: policy effects, persistence and multipliers

Article Abstract:

An analysis of the bounded rationality and strategic complementarity in an intentionally simple and stylized aggregative economic model reveals that strategic complementarity greatly magnifies even small departures from rational expectations. The study also reveals that departures from rational expectations, taken with strategic complementarity, leads to equilibria in policy effectiveness, output persistence and multiplier effects.

Economics, Research and Development in the Social Sciences and Humanities, Macroeconomics, Linear complementarity problem, Functions of bounded variation, Bounded variation functions

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