Universität Wien

040065 UK Modelling bounded rationality (MA) (2020W)

Smart heuristics and other alternatives to rational behavior

8.00 ECTS (4.00 SWS), SPL 4 - Wirtschaftswissenschaften
Continuous assessment of course work


Note: The time of your registration within the registration period has no effect on the allocation of places (no first come, first served).


max. 30 participants
Language: English


Classes (iCal) - next class is marked with N

Tuesday 06.10. 16:45 - 18:15 Digital
Wednesday 07.10. 15:00 - 16:30 Digital
Tuesday 13.10. 16:45 - 18:15 Digital
Wednesday 14.10. 15:00 - 16:30 Digital
Tuesday 20.10. 16:45 - 18:15 Digital
Wednesday 21.10. 15:00 - 16:30 Digital
Wednesday 28.10. 15:00 - 16:30 Digital
Tuesday 03.11. 16:45 - 18:15 Digital
Wednesday 04.11. 11:30 - 13:00 Digital
Tuesday 10.11. 16:45 - 18:15 Digital
Wednesday 11.11. 15:00 - 16:30 Digital
Tuesday 17.11. 16:45 - 18:15 Digital
Wednesday 18.11. 15:00 - 16:30 Digital
Tuesday 24.11. 16:45 - 18:15 Digital
Wednesday 25.11. 15:00 - 16:30 Digital
Tuesday 01.12. 16:45 - 18:15 Digital
Wednesday 02.12. 15:00 - 16:30 Digital
Wednesday 09.12. 15:00 - 16:30 Digital
Tuesday 15.12. 16:45 - 18:15 Digital
Wednesday 16.12. 15:00 - 16:30 Digital
Tuesday 12.01. 16:45 - 18:15 Digital
Wednesday 13.01. 15:00 - 16:30 Digital
Tuesday 19.01. 16:45 - 18:15 Digital
Wednesday 20.01. 15:00 - 16:30 Digital
Tuesday 26.01. 16:45 - 18:15 Digital
Wednesday 27.01. 15:00 - 16:30 Digital


Aims, contents and method of the course

Rationality in economics typically refers to predictions based on expected utility maximization. Subjects need to know all their options, need to know all possible consequences of any of their choices and have to assign probabilities to any event that they are uncertain about. In this course we are interested in methodologies that do not make these heroic assumptions but satisfy some principles that identify behavior as being optimal in some sense. Behavior is optimal in a minimal sense if it can be backed up by a reason for acting. We will not limit ourselves to this minimal interpretation of optimality as this will not give us any insight as to whether we should expect such behavior to survive over time. The presumption is that a heuristic as a model of how to make choices can only emerge if it has properties that signal it out as being optimal or particularly well adapted to a situation. A central paper in this course (Schlag, 1998) was recently elected as one of the 50 most influential papers in a leading economic theory journal in the past 50 years. The objective therein is to understand how individual can learn from each other with only very limited understanding of the consequences of their behavior. It is the way that individuals learn which can make them very smart as a whole. We will also consider individuals who can only learn from their own past experiences. Buzz words include imitation, cultural evolution, heuristics, tabus and reinforcement learning. A central focus of the course will be on fostering a discussion about the philosophical and economic approaches to rationality and how the latter can be relaxed.

Assessment and permitted materials

Exams will be open book. The grade of the course is based on a midterm (35%), a final exam (35%) and oral participation together with some take home assignments (30%).

* Brief comments on a third paper during class

* A seminar paper on a fourth paper

* Active participation and discussion during class meetings

The exact weights of these activities for the composition of the final grade will be announced during the first class meeting.

Minimum requirements and assessment criteria

This is both a course for the Master in Economics and for the Master in Philosophy and Economics. It should only be taken if you are familiar with expected utility theory (von Neumann Morgenstern preferences). Mathematical notation will be used to describe what individuals are doing and how this changes over time. Mathematics at a very simple level will be used to define optimality and then to compute what is optimal. In particular, the original article (Schlag, 1998) is mathematically unnecessarily advanced. We will see in the course that the basic intuition does not require such elaborate math.

Examination topics

Everything that was taught in class.

Reading list

Schlag, K.H. (1998), Why Imitate, and if so, How? A Boundedly Rational Approach to Multi-Armed Bandits, Journal of Economic Theory 78 (1998), 130–156.
Börgers, T., A. Morales, and R. Sarin (2004), Expedient and monotone learning rules, Econometrica 72(2), 383–405.
Weibull, J. (1997), Evolutionary Game Theory, MIT Press.
Fudenberg, D., and D. Levine (1998), The Theory of Learning in Games, MIT Press.

Association in the course directory

Last modified: Fr 12.05.2023 00:12