Proceedings

PR – How Business Management Games Can Be Used To Analyze The Boundedly Rational Behaviour Of Economic Agents (p388-395)

Regulatory policies often aim to steer the behaviour of economic agents by changing their economic environment. Assessing the potential impacts of regulatory policies requires predictions about how humans adapt to such changes. One important prerequisite for meaningful policy impact analysis is in-depth knowledge of why and to what extent economic agents behave in a boundedly rational way. We propose that business management games be used to contribute towards better understanding of agent behaviours since they provide an inexpensive opportunity to reach beyond existing anecdotal evidence concerning “behavioural anomalies”. Modifying an existing business management game in which investment, financing and production decisions have to be made, we demonstrate how bounded rationality can be quantified and separated into its two components: incomplete information and limited cognitive abilities. The resulting data show that decisions made by participants in this game are strongly influenced by bounded rationality. They also show that both incomplete information and limited cognitive abilities are relevant components of the bounded rationality displayed by players.

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Author(s): Hengel, P., Hirschauer, N., Mußhoff, O.

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Organizations(s): Georg-August-University Göttingen, Martin-Luther-University Halle