Bounded Rationality

Stefan Rass, Stefan Schauer, Sandra König, Quanyan Zhu

Research output: Chapter in Book/Report/Conference proceedingChapter

Abstract

This chapter revisits the concept of a utility function, first introduced in Chap. 3, from an axiomatic viewpoint. We review the fundamental principles of decision making as axioms that induce the existence of (continuous) utility functions. Since empirical research of decision situations in real life has shown considerable deviations between mathematical rationality and human behavior, we continue with a series of possible explanations by relaxing or dropping individual axioms from the set of fundamental principles, to explain the difference between human behavior and the utility maximization paradigm. This establishes valuable lessons for the construction of games, say if payoff models are constructed from subjective data (interviews, expert estimates, or similar), but also highlights the need to consider individual risk perception and attitude though the utility function design in a game theoretic model.

Original languageEnglish (US)
Title of host publicationAdvanced Sciences and Technologies for Security Applications
PublisherSpringer
Pages99-114
Number of pages16
DOIs
StatePublished - 2020

Publication series

NameAdvanced Sciences and Technologies for Security Applications
ISSN (Print)1613-5113
ISSN (Electronic)2363-9466

ASJC Scopus subject areas

  • Safety, Risk, Reliability and Quality
  • Safety Research
  • Political Science and International Relations
  • Computer Science Applications
  • Computer Networks and Communications
  • Health, Toxicology and Mutagenesis

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