Abstract
The traditional approach to modeling behavioral anomalies consists of modifying the specification of agents’ characteristics in order to exhibit or generate each such anomaly. Within this context, I raise two issues: (1) why agents’ characteristics differ and how they are determined, and (2) the design of policies and institutions when traits are at least partially influenced by the environment. However, the main argument in the paper is that the traditional, piecemeal approach may be problematic due to interactive effects between traits or behaviors. This suggests that greater effort should be devoted to determining which traits are interrelated and to studying them jointly rather than separately. Finally, I briefly mention two alternative modeling strategies which may be more amenable to analyzing behavior in new situations.
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Notes
- 1.
This requires that the model contains all essential ingredients. Otherwise, if missing factors would affect the relationship between traits and outcomes, then the mechanism is underdetermined.
- 2.
This serves to establish bounds for expected (and possibly not yet observed) behavior of those with such attributes. In addition, it might serve as a test of the model: if actual, observed behavior is inconsistent with the theory, then the theory is wrong.
- 3.
This includes prediction and forecasting.
- 4.
This assumes such acts do not serve another purely selfish motive (such as increasing tax deductions), which may be consistent with the standard model.
- 5.
A few examples include Brennan (1973) on malice, Kahneman and Tversky (1979) on loss aversion, Kreps (1979) on flexibility, Sen (1991) on freedom, Fehr and Schmidt (1999) on inequality aversion, Battigalli and Dufwenberg (2007) on guilt, and Anderlini and Terlizzese (2017) on trust, among many others.
- 6.
Or in such an interdependent environment, they might wish to proactively signal or affect the behavior of others.
- 7.
Other than by affecting their prevalence through selective mating.
- 8.
Related to this issue of outside influence are the models with endogenous preferences in which agent’s preferences are not given but may change in response to their interactions. (See, for example, Cervellati et al. (2010)).
- 9.
Analogous to Lancasterian characteristics.
- 10.
More precisely, it would shift the question of why agents have different concerns to why they have different receptors.
- 11.
Similar to the goal of Artificial Intelligence.
- 12.
Such a model might provide a “rule-of-thumb” for behavior, as mentioned earlier.
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Kranich, L. (2019). Modeling Behavior: A Critical Agenda. In: Laslier, JF., Moulin, H., Sanver, M., Zwicker, W. (eds) The Future of Economic Design. Studies in Economic Design. Springer, Cham. https://doi.org/10.1007/978-3-030-18050-8_30
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