Title: Decision-making environments in which unboundedly rational decision makers choose to ignore relevant information

Authors: Nathan Berg

Addresses: School of Social Sciences, University of Texas at Dallas, GR 31 211300, Box 830688, Richardson, TX 75083 0688, USA Center for Adaptive Behavior and Cognition, Max Planck Institute for Human Development, Lentzeallee 94, 14195 Berlin

Abstract: This paper advances the claim that ignoring relevant information is sometimes consistent with good decision making. Although that finding is not new, the argument presented here is. In contrast with bounded rationality models, the decision-making model in this paper presupposes no cognitive constraints or costs associated with processing available information. The paper identifies a class of decision-making environments characterised by asymmetric payoffs and probabilities – a property which gives rise to optimal decision rules that ignore relevant information. In other words, optimal decision procedures used by omniscient agents are sometimes independent of variables that objectively predict future outcomes.

Keywords: ignoring information; relevant information; bounded rationality; optimal decision rules; adaptive; behavioural; decision making.

DOI: 10.1504/GBER.2005.006920

Global Business and Economics Review, 2005 Vol.7 No.1, pp.59 - 73

Published online: 25 Apr 2005 *

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