Bounded Rationality and Bounded Individuality

Abstract

This paper argues that since the utility function representation of the individual is derived from standard rationality theory, the view that rationality is bounded implies that individuality should be seen to be bounded as well. The meaning of this idea is developed in terms of two ways in which individuality is bounded, with one bound associated with bounded rationality in Kahneman and Tversky’s prospect theory and another bound associated with bounded rationality in Simon’s thinking. The two bounds on individuality are argued to be employed in agent-based modeling and social identity theory. How bounded individuality might be formally modeled is illustrated in an account of Kirman’s Marseille fish market analysis.

Citation

Davis, J.B. (2015), "Bounded Rationality and Bounded Individuality", A Research Annual (Research in the History of Economic Thought and Methodology, Vol. 33), Emerald Group Publishing Limited, Leeds, pp. 75-93. https://doi.org/10.1108/S0743-415420150000033011