Inductive Reasoning and Bounded Rationality.¶
Arthur, W. B. (1994). Inductive Reasoning and Bounded Rationality. American Economic Review, 84(2), 406-411.
Cited by¶
2 citations across 2 artifacts.
Each citation links to the sentence it supports in the citing article.
Primes¶
- Self-Defeating Prediction
- Minority games and El Farol. A shared prediction rule selects the same action for everyone, defeating any prediction that depended on heterogeneous response.
This sourceIntroduces the El Farol Bar problem, showing that a shared deterministic prediction rule is self-defeating and that heterogeneous (randomized/inductive) expectations are required to sustain an equilibrium.
- Minority games and El Farol. A shared prediction rule selects the same action for everyone, defeating any prediction that depended on heterogeneous response.
Domain-specific¶
- El Farol Bar Problem
- The El Farol bar problem (W. Brian Arthur, 1994) is a canonical model of decentralized decision-making under congestion, formulated to expose the failure of deductive rationality in a specific class of coordination problem
This sourceArthur's original statement of the bar problem, constructed to show that crowding-limited coordination has no deductively rational solution and forces agents into inductive reasoning. Arthur's simulation result: mean attendance converges to the 60 threshold while the set of active predictors keeps changing membership forever, because any shared expectation invalidates itself. Arthur's own account that the problem was inspired by the El Farol bar in Santa Fe, which offered Irish music on Thursday nights. The model's parameters: 100 people deciding independently each week, with the evening enjoyable only if fewer than 60 percent of them attend.
Supported in partVerified against the source
- The El Farol bar problem (W. Brian Arthur, 1994) is a canonical model of decentralized decision-making under congestion, formulated to expose the failure of deductive rationality in a specific class of coordination problem
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