A note on case-based optimization with a non-degenerate similarity function

Guerdjikova, Ani

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URL: http://ub-madoc.bib.uni-mannheim.de/2696
URN: urn:nbn:de:bsz:180-madoc-26966
Document Type: Working paper
Year of publication: 2004
The title of a journal, publication series: None
Publication language: English
Institution: School of Law and Economics > Sonstige - Fakultät für Rechtswissenschaft und Volkswirtschaftslehre
MADOC publication series: Sonderforschungsbereich 504 > Rationalitätskonzepte, Entscheidungsverhalten und ökonomische Modellierung (Laufzeit 1997 - 2008)
Subject: 330 Economics
Classification: JEL: D83 D81 ,
Subject headings (SWD): Entscheidungstheorie , Optimierung , Theorie
Keywords (English): Case-Based Decision Theory , similarity , optimal behavior
Abstract: The paper applies the "realistic-ambitious" rule for adaptation of the aspiration level suggested by Gilboa and Schmeidler (1996) to a situation in which the similarity between the available acts is represented by a non-degenerate function. The paper shows that the optimality result obtained by Gilboa and Schmeidler (1996) in general fails. With a concave similarity function, the best corner act is chosen in the limit. Introducing convex regions into the similarity function improves the limit choice. A sufficiently fine similarity function allows to approximate optimal behavior with an arbitrary degree of precision.
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