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In recent years the understanding of the cognitive foundations of
economic behavior has become increasingly important. This volume
contains contributions from such leading scholars as Adam
Brandenburger, Michael Bacharach and Patrick Suppes. It will be of
great interest to academics and researchers involved in the field
of economics and psychology as well as those interested in
political economy more generally.
This volume brings together important papers, coupled with new
introductions, in the massively influential area of uncertainty in
economic theory. Seminal papers are available together for the
first time in book format, with new introductions and under the
steely editorship of Itzhak Gilboa - this book is a useful
reference tool for economists all over the globe.
The book presents an axiomatic approach to the problems of
prediction, classification, and statistical learning. Using
methodologies from axiomatic decision theory, and, in particular,
the authors' case-based decision theory, the present studies
attempt to ask what inductive conclusions can be derived from
existing databases. It is shown that simple consistency rules lead
to similarity-weighted aggregation, akin to kernel-based methods.
It is suggested that the similarity function be estimated from the
data. The incorporation of rule-based reasoning is discussed.
Recent decades have witnessed developments in decision theory that
propose an alternative to the accepted Bayesian view. According to
this view, all uncertainty can be quantified by probability
measures. This view has been criticized on empirical as well as
conceptual grounds. David Schmeidler has offered an alternative way
of thinking about decision under uncertainty, which has become
popular in recent years. This book provides a review and an
introduction to this new decision theory under uncertainty. The
first part focuses on theory: axiomatizations, the definition of
uncertainty aversion, the issue of updating and independence, and
so forth. The second part deals with applications to economic
theory, game theory, and finance. With a wide variety of
contributions of the highest order, the book can be considered to
be extremely authoritative. This is the first collection to include
papers on this topic, and it can thus serve as an introduction to
researchers who are new to the field or a graduate course textbook.
With this goal in mind, the book contains survey introductions that
are aimed at a graduate level student, and help explain the main
ideas, as well as put them in perspe
In recent years the understanding of the cognitive foundations of economic behavior has become increasingly important. This volume contains contributions from such leading scholars as Adam Brandenburger, Michael Bacharach and Patrick Suppes. It will be of great interest to academics and researchers involved in the field of economics and psychology as well as those interested in political economy more generally.
This book describes the classical axiomatic theories of decision
under uncertainty, as well as critiques thereof and alternative
theories. It focuses on the meaning of probability, discussing some
definitions and surveying their scope of applicability. The
behavioral definition of subjective probability serves as a way to
present the classical theories, culminating in Savage's theorem.
The limitations of this result as a definition of probability lead
to two directions - first, similar behavioral definitions of more
general theories, such as non-additive probabilities and multiple
priors, and second, cognitive derivations based on case-based
techniques.
Gilboa and Schmeidler provide a new paradigm for modeling decision making under uncertainty. Case-based decision theory suggests that people make decisions by analogies to past cases: they tend to choose acts that performed well in the past in similar situations, and to avoid acts that performed poorly. The authors describe the general theory and its relationship to planning, repeated choice problems, inductive inference, and learning. They highlight its mathematical and philosophical foundations and compare it to expected utility theory as well as to rule-based systems.
The book describes formal models of reasoning that are aimed at
capturing the way that economic agents, and decision makers in
general think about their environment and make predictions based on
their past experience. The focus is on analogies (case-based
reasoning) and general theories (rule-based reasoning), and on the
interaction between them, as well as between them and Bayesian
reasoning. A unified approach allows one to study the dynamics of
inductive reasoning in terms of the mode of reasoning that is used
to generate predictions.
This book describes the classical axiomatic theories of decision
under uncertainty, as well as critiques thereof and alternative
theories. It focuses on the meaning of probability, discussing some
definitions and surveying their scope of applicability. The
behavioral definition of subjective probability serves as a way to
present the classical theories, culminating in Savage's theorem.
The limitations of this result as a definition of probability lead
to two directions first, similar behavioral definitions of more
general theories, such as non-additive probabilities and multiple
priors, and second, cognitive derivations based on case-based
techniques.
Gilboa and Schmeidler provide a new paradigm for modeling decision making under uncertainty. Case-based decision theory suggests that people make decisions by analogies to past cases: they tend to choose acts that performed well in the past in similar situations, and to avoid acts that performed poorly. The authors describe the general theory and its relationship to planning, repeated choice problems, inductive inference, and learning. They highlight its mathematical and philosophical foundations and compare it to expected utility theory as well as to rule-based systems.
A nontechnical, concise, and rigorous introduction to the rational
choice paradigm, focusing on basic insights applicable in fields
ranging from economics to philosophy. This book offers a rigorous,
concise, and nontechnical introduction to some of the fundamental
insights of rational choice theory. It draws on formal theories of
microeconomics, decision making, games, and social choice, and on
ideas developed in philosophy, psychology, and sociology. Itzhak
Gilboa argues that economic theory has provided a set of powerful
models and broad insights that have changed the way we think about
everyday life. He focuses on basic insights of the rational choice
paradigm-the general conceptualization rather than a particular
theory-that survive recent (and well-justified) critiques of
economic theory's various failures. Gilboa explains the main
concepts in language accessible to the nonspecialist, offering a
nonmathematical guide to some of the main ideas developed in
economic theory in the second half of the twentieth century.
Chapters cover feasibility and desirability, utility maximization,
constrained optimization, expected utility, probability and
statistics, aggregation of preferences, games and equilibria, free
markets, and rationality and emotions. Online appendixes offer
additional material, including a survey of relevant mathematical
concepts.
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