A Dynamic Model of a Boundedly Rational Consumer with a Simple Least Squared Learning Mechanism

Moving from a model with a boundedly rational consumer (Naimzada and Tramontana, Journal of Analytical and Institutional Economics 25:59–94, 2008), characterized by a gradient-like decisional process in which, under particular parameters conditions, the asymptotical convergence to the optimal choice...

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Bibliographic Details
Published in:Computational economics 2010-06, Vol.36 (1), p.47-56
Main Authors: Naimzada, Ahmad K., Tramontana, Fabio
Format: Article
Language:English
Subjects:
Algorithms
Behavior
Behavioral/Experimental Economics
Bounded rationality
Computer Appl. in Social and Behavioral Sciences
Consumption
Convergence
Decision making
Economic models
Economic theory
Economic Theory/Quantitative Economics/Mathematical Methods
Economics
Economics and Finance
Endogenous preferences
Equilibrium
Learning
Least squares method
Math Applications in Computer Science
Operations Research/Decision Theory
Preferences
Rationality
Stabilizing algorithm
Studies
Utility functions
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Summary:Moving from a model with a boundedly rational consumer (Naimzada and Tramontana, Journal of Analytical and Institutional Economics 25:59–94, 2008), characterized by a gradient-like decisional process in which, under particular parameters conditions, the asymptotical convergence to the optimal choice does not happen, in the present work we prove that with endogenous reactivity parameter, the consumer becomes able to learn from the past and then his consumption choice converges to the rational one.
ISSN:0927-7099
1572-9974
DOI:10.1007/s10614-010-9207-1