Analogies and theories: The role of simplicity and the emergence of norms

Gabrielle Gayer*, Itzhak Gilboa

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

Abstract

We consider the dynamics of reasoning by general rules (theories) and by specific cases (analogies). When an agent faces an exogenous process, we show that, under mild conditions, if reality happens to be simple, the agent will converge to adopt a theory and discard analogical thinking. If, however, reality is complex, analogical reasoning is unlikely to disappear. By contrast, when the agent is a player in a large population coordination game, and the process is generated by all players' predictions, convergence to a theory is much more likely. This may explain how a large population of players selects an equilibrium in such a game, and how social norms emerge. Mixed cases, involving noisy endogenous processes are likely to give rise to complex dynamics of reasoning, switching between theories and analogies.

Original languageEnglish
Pages (from-to)267-283
Number of pages17
JournalGames and Economic Behavior
Volume83
DOIs
StatePublished - Jan 2014

Keywords

  • Case-based reasoning
  • Equilibrium selection
  • Model selection
  • Rule-based reasoning
  • Social norms

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