Economics Bounded Rationality Questions
Bounded rationality impacts the study of game theory by recognizing that individuals have limited cognitive abilities and information processing capabilities. This means that individuals may not always make fully rational decisions in game situations. Bounded rationality acknowledges that individuals may use simplified decision-making strategies, rely on heuristics, or make decisions based on incomplete information. Therefore, game theory models need to incorporate these limitations in order to accurately predict and analyze the behavior of individuals in strategic interactions.