Boundedly rational backward induction

@article{Ke2019BoundedlyRB,
  title={Boundedly rational backward induction},
  author={Shaowei Ke},
  journal={Theoretical Economics},
  year={2019}
}
  • Shaowei Ke
  • Published 2019
  • Economics
  • Theoretical Economics
This paper proposes simple axioms that characterize a generalization of backward induction. At any node of a decision tree, the decision maker looks forward a fixed number of stages perfectly. Beyond that, the decision maker aggregates continuation values according to a function that captures reasoning under unpredictability. The model is uniquely identified from the decision maker's preference over decision trees. Confronting a decision tree, the decision maker iteratively revises her plan for… 

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