A Behavioral Approach to Distribution and Bargaining

Authored by: Werner Güth , Andreas Ortmann

Handbook of Contemporary Behavioral Economics

Print publication date:  July  2006
Online publication date:  January  2015

Print ISBN: 9780765613028
eBook ISBN: 9781315703879
Adobe ISBN: 9781317469162


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Canonical game theory (as codified in textbooks such as Kreps 1990a, 1990b and Mas-Colell, Whinston, and Green 1995) requires unlimited cognitive and information-processing capabilities. It is obvious that these requirements are at odds with what humans are equipped with or typically have at their disposal. 1 Cowan (2001), updating the message of a famous paper by Miller (1956), has summarized the available evidence and argues that people can remember on average about four chunks of information. Given such cognitive capacity constraints, only a very small set of games can be analyzed (“solved”) in accordance with canonical game theory by real people.

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