Satisficing Equilibrium

Abstract

We propose a solution concept in which each agent i does not necessarily optimize but selects one of their top k_i actions. Our concept accounts for heterogeneous agents' bounded rationality. We show that there exist satisficing equilibria in which all but one agent best-respond and the remaining agent plays at least a second-best action in asymptotically almost all games. Additionally, we define a class of approximate potential games in which satisficing equilibria are guaranteed to exist. Turning to foundations, we characterize satisficing equilibrium via decision theoretic axioms and we show that a simple dynamic converges to satisficing equilibria in almost all large games. Finally, we apply the satisficing lens to two classic games from the literature.

Tasks

Reproductions