Bounded Rationality and Beyond
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News on the effects of bounded rationality in economics and business, relationships and politics
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(Failure of the) Wisdom of the crowds in an endogenous opinion dynamics model with multiply biased agent

We study an endogenous opinion (or, belief) dynamics model where we endogenize the social network that models the link (`trust') weights between agents. Our network adjustment mechanism is simple: an agent increases her weight for another agent if that agent has been close to truth (whence, our adjustment criterion is `past performance'). Moreover, we consider multiply biased agents that do not learn in a fully rational manner but are subject to persuasion bias - they learn in a DeGroot manner, via a simple `rule of thumb' - and that have biased initial beliefs. In addition, we also study this setup under conformity, opposition, and homophily - which are recently suggested variants of DeGroot learning in social networks - thereby taking into account further biases agents are susceptible to. Our main focus is on crowd wisdom, that is, on the question whether the so biased agents can adequately aggregate dispersed information and, consequently, learn the true states of the topics they communicate about. In particular, we present several conditions under which wisdom fails.

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Digitally yours: On Signs, Traces and Cues

Digitally yours: On Signs, Traces and Cues | Bounded Rationality and Beyond | Scoop.it

While pheromone reinforcement plays a role as system’s memory, evaporation allows the system to adapt and dynamically decide, without any type of centralized or hierarchical control [...], below.

“[...] whereas signals tends to be conspicuous, since natural selection has shaped signals to be strong and effective displays, information transfer via cues is often more subtle and based on incidental stimuli in an organism’s social environment [...]“, Seeley, T.D., “The Honey Bee Colony as a Super-Organism”, American Scientist, 77, pp.546-553, 1989.

 
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Behavioural economics: seven principles for policy-makers

The standard (neoclassical) economic analysis assumes that humans are rational and behave in a way to maximise their individual self-interest. Whilst this ‘rational man’ assumption yields a powerful tool for analysis, it has many shortfalls that can lead to unrealistic economic analysis and policy-making. This Briefing distils many concepts from behavioural economics and psychology down to seven key principles, which highlight the main shortfalls in the neoclassical model of human
behaviour.

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Organizational Control Systems and Pay-for-Performance in the Public Service

Abstract: Under certain conditions, output related performance measurement and pay-for-performance produce negative outcomes. We argue that in public service, these negative effects are stronger than in the private sector. We combine Behavioural Economics and Management Control Theory to determine under which conditions this is the case. We suggest as alternatives to the dominant output related pay-for-performance systems selection and socialization, exploratory use of output performance measures, and awards.

 
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Animal Spirits: La natura umana e il sistema economico - Media - festivaleconomia.it

Animal Spirits: La natura umana e il sistema economico - Media - festivaleconomia.it | Bounded Rationality and Beyond | Scoop.it

Animal Spirits: La natura umana e il sistema economico- 

Gli individui sono spesso guidati da motivazioni non economiche. Decisioni importanti sono ispirate dagli "animal spirits" e tendono ad amplificare le fluttuazioni macroeconomiche. Uno di questi istinti, un improvviso crollo della fiducia, rappresenta uno dei fattori scatenanti dell'attuale recessione. I governi hanno un importante ruolo da giocare nel porre limiti agli animal spirits. Ma in concreto cosa possono fare adesso per uscire dalla crisi?

 

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Quantitative versus qualitative in neuromarketing research

Quantitative versus qualitative in neuromarketing research | Bounded Rationality and Beyond | Scoop.it
Abstract

 

Marketing research methods continuously develop and over the last decade technology offered solutions to improve this area. Traditional marketing research methods fail at some point in certain cases, and since emotions are mediators of how consumers process marketing messages, understanding of cognitive responses to advertisements have always been a challenge in methodology. Neuromarketing is the branch of neuroscience research that aims to better understand the consumer through his unconscious processes and has application in marketing, explaining consumer's preferences, motivations and expectations, predicting his behavior and evaluating successes or failures of advertising messages. In this context, this study aims to analyze relatively new alternative techniques in neuromarketing research, from quantitative and qualitative perspectives. After presenting the common space between quantitative research and neuromarketing research, respectively between qualitative research and neuromarketing research, the study will conclude on whether neuromarketing research is closer to a quantitative approach, or to a qualitative one.

 

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Special Issue: Entropy Methods in Guided Self-Organization

Special Issue: Entropy Methods in Guided Self-Organization | Bounded Rationality and Beyond | Scoop.it

The goal of Guided Self-Organization (GSO) is to leverage the strengths of self-organization while still being able to direct the outcome of the self-organizing process. GSO typically has the following features: (i) an increase in organization (structure and/or functionality) over some time; (ii) the local interactions are not explicitly guided by any external agent; (iii) task-independent objectives are combined with task-dependent constraints.

A number of attempts have been made to formalize aspects of GSO within information theory, thermodynamics and dynamical systems. However, the lack of a broadly applicable mathematical framework across multiple scales and contexts leaves GSO methodology incomplete. Devising such a framework and identifying common principles of guidance are the main themes of the GSO workshops.

Of particular interest are well-founded, but general methods for characterizing GSO systems in a principled way, with the view of ultimately allowing them to be guided toward pre-specified goals. In general, various entropy methods drawing from, and overlapping with, information theory, thermodynamics, nonlinear dynamics and graph theory are relevant, while quantifying complexity and its sources is a common theme.

 

Deadline for manuscript submissions: 31 January 2014

http://www.mdpi.com/journal/entropy/special_issues/self-organization

See also http://prokopenko.net/cfp13.html ;


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Risk, chance and choice: a guide to life's uncertainties

Should I drive or take the train? Should I risk that extra glass or wine, or that third sausage? What about attempting that sky-dive?

Life presents us with an endless series of choices and weighing up the relative risks and rewards is far from easy. Often we make decisions based on gut instinct rather than hard facts, because chance and risk aren't just about numbers - it's about what we believe, who we trust and how we feel about the world around us.

Risk experts David Speigelhalter and Michael Blastland visit the RSA to explain how we can get better at understanding and dealing with uncertainty – and offer an entertaining and illuminating guide to everyday decision-making.

 
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The astonishing maps that reveal how our brain organises everything we see

The astonishing maps that reveal how our brain organises everything we see | Bounded Rationality and Beyond | Scoop.it

 

The astonishing maps that reveal how our brain organises everything we seeUC Berkeley team use fMRI to find out where semantically linked concepts are processed in the brainFindings are a quantum leap from previous research mapping concepts to brain regionsTeam create video and interactive website to present their incredible discoveries

 



Read more: http://www.dailymail.co.uk/sciencetech/article-2251101/The-astonishing-maps-reveal-brain-organises-see.html#ixzz2e0de6aqz ;
Follow us: @MailOnline on Twitter | DailyMail on FacebookA team at the University of California, Berkeley, have found that the brain is wired to put in order all the categories of objects and actions that we see.

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UCLA researcher invents new tools to manage 'information overload' threatening neuroscience

UCLA researcher invents new tools to manage 'information overload' threatening neuroscience | Bounded Rationality and Beyond | Scoop.it

Before the digital age, neuroscientists got their information in the library like the rest of us. But the explosion of neuroscience research has resulted in the publication of nearly 2 million papers — more data than any researcher can read and absorb in a lifetime.

 That's why a UCLA team has invented research maps. Easily accessible through an online app, the maps help neuroscientists quickly scan what is already known and plan their next study. The Aug. 8 edition of the journal Neuron describes these new tools.  "Information overload is the elephant in the room that most neuroscientists pretend to ignore," said principal investigator Alcino Silva, a professor of neurobiology at the David Geffen School of Medicine at UCLA and professor of psychiatry at the Semel Institute for Neuroscience and Human Behavior at UCLA. "Without a way to organize the literature, we risk missing key discoveries and duplicating earlier experiments. Research maps will enable neuroscientists to quickly clarify what ground has already been covered and to fully grasp its meaning for future studies."


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The psychological poverty trap

The psychological poverty trap | Bounded Rationality and Beyond | Scoop.it

The poor aren't less able, they're distracted, says poverty expert Eldar Shafir. Privileged people subjected to the same conditions would also make bad decisions. The poor often behave in less capable ways, which can further perpetuate poverty. We hypothesize that poverty directly impedes cognitive function and present two studies that test this hypothesis. First, we experimentally induced thoughts about finances and found that this reduces cognitive performance among poor but not in well-off participants. Second, we examined the cognitive function of farmers over the planting cycle. We found that the same farmer shows diminished cognitive performance before harvest, when poor, as compared with after harvest, when rich. This cannot be explained by differences in time available, nutrition, or work effort. Nor can it be explained with stress: Although farmers do show more stress before harvest, that does not account for diminished cognitive performance. Instead, it appears that poverty itself reduces cognitive capacity. We suggest that this is because poverty-related concerns consume mental resources, leaving less for other tasks. These data provide a previously unexamined perspective and help explain a spectrum of behaviors among the poor. We discuss some implications for poverty policy.

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Understanding Large Group Intervention Processes: A complexity theory perspective

Abstract
This article evaluates large group interventions as organizational change methods that address more adequately than traditional models the complexity, unpredictability, and turbulence associated with today’s organizations. Large group interventions are presented as a means to facilitate
organizational change from a complexity science perspective. The authors argue that such interventions increase an organization’s potential for amplifying ideas and generating radical change through self-organization: By equipping organizations to rely on their ability to reference and rearrange existing resources into more complex states, they create a balance between
structure and information flow. The article concludes with a discussion of the implications of large group interventions for organizational change.

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Self-Organization In 1-d Swarm Dynamics

Self-organization of a biologically motivated swarm into smaller subgroups of different velocities is found by solving a 1-dimensional adaptive-velocity swarm, in which the velocity of an agent is averaged over a finite local radius of influence. Using a mean field model in phase space, we find a dependence of this group-division phenomenon on the typical scales of the initial swarm in the position and velocity dimensions. Comparisons are made to previous swarm models in which the speed of an agent is either fixed or adjusted according to the degree of direction consensus among its local neighbors. Key words: self-organization of swarm, phase space, multi-agent system, dynamical system, group-division.

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Social Cognitive Maps, Swarm Perception and Distributed Search on Dynamic Landscapes

Swarm Intelligence (SI) is the property of a system whereby the collective behaviors of (unsophisticated) entities interacting locally with their environment cause coherent functional global patterns to emerge. SI provides a basis with which it is possible to explore collective (or distributed) problem solving without centralized control or the provision of a global model. To tackle the formation of a coherent social collective intelligence from individual behaviors, we discuss several concepts related to self-organization, stigmergy and social foraging in animals. Then, in a more abstract level we suggest and stress the role played not only by the environmental media as a driving force for societal learning, as well as by positive and negative feedbacks produced by the many interactions among agents. Finally, presenting a simple model based on the above features, we will address the collective adaptation of a social community to a cultural (environmental, contextual) or media informational dynamical landscape, represented here - for the purpose of different experiments - by several three-dimensional mathematical functions that suddenly change over time. Results indicate that the collective intelligence is able to cope and quickly adapt to unforeseen situations even when over the same cooperative foraging period, the community is requested to deal with two different and contradictory purposes. KEYWORDS: Swarm Intelligence and Perception, Social Cognitive Maps, Social Foraging, Self-Organization, Distributed Search and Optimization

  

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10 Magical Effects Music Has On the Mind

10 Magical Effects Music Has On the Mind | Bounded Rationality and Beyond | Scoop.it
Music can improve verbal IQ, aid in heart disease treatment, evoke colours in the mind and even help you see happy faces all around.

Every fan of music knows the tremendous power it can have over both thoughts and emotions.

Great music can transform an ordinary day into something magical, even spiritual. It can provide solace, release, strong sensations and more. But music’s influence spreads further still: right up from our genetic code, through our thoughts and bodies and out into how we relate in groups.

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Behavioral Economics: Past, Present, Future - Colin F. Camerer


Behavioral economics increases the explanatory power of economics by providing it with more realistic psychological foundations. This book consists of representative recent articles in behavioral economics. This chapter is intended to provide an introduction to the approach and methods of behavioral economics, and to some of its major findings, applications, and promising new directions. It also seeks to fill some unavoidable gaps in the chapters’ coverage of topics.

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Adaptive Learning and Survey Data

Abstract: This paper investigates the ability of the adaptive learning approach to replicate the expectations of professional forecasters. For a range of macroeconomic and financial variables, we compare constant and decreasing gain learning models to simple, yet powerful benchmark models. We find that both, constant and decreasing gain models, provide a good fit for the expectations of professional forecasters for a range of variables. These results suggest that, instead of relying only on the the most recent observation, agents use more complex models to form their expectations even for financial variables where random walk forecasts are often difficult to beat.

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Paura di perdere negli investimenti? Colpa dell’amigdala (intervista a Matteo Motterlini)

Paura di perdere negli investimenti? Colpa dell’amigdala (intervista a Matteo Motterlini) | Bounded Rationality and Beyond | Scoop.it

Otto ricercatori del Centro di Neuroscienze Cognitive dell’Università Vita-Salute San Raffaele di Milano hanno pubblicato sulla prestigiosa rivista The Journal of Neuroscience uno studio su un comportamento insito nella natura stessa dell’homo sapiens: la perdita di una data somma di denaro pesa nella nostra mente assai più d’una vincita di pari ammontare.

Come dimostrato dagli studi del Premio Nobel per l’Economia Daniel Kahneman, infatti, le possibili perdite “pesano” tipicamente sensibilmente più dei guadagni: nelle nostre scelte quindi preferiamo evitare le perdite all’ottenere guadagni, almeno finché il possibile guadagno non è pari a circa il doppio della possibile perdita. Questo vuole dire che, in media, abbiamo una forte avversione al rischio.

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Fuzzy Math: What Makes Something Seem Like A Good Deal?

Fuzzy Math: What Makes Something Seem Like A Good Deal? | Bounded Rationality and Beyond | Scoop.it
What makes something seem like a good deal? Subtle ways of framing the same information can make consumers more compelled to purchase.Every day consumers are bombarded by discounts. %5 off this, 20%
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Is bounded rationality a capacity enabling learning? - Marco Novarese

Abstract
This papers contributes to the stream of research on rule based behaviour, and rationality. A bounded rational agent can deal just with a reduced number of variables, neglecting part of the overall complexity. This is usually taken as just a limitation: agents cannot deal with all relevant information and use biased decisional shortcuts. The stream of research on Ecological rationality, yet, evidences the possible advantage of using a limited amount of information. The present paper takes a similar, but not identical, point of view. I propose an idea based on some contributions on the ecology of the mind by Gregory Bateson. Learning requires to recognize a series of situations as identical and then to observe the effect of given variables in specific fixed contexts. Two situations can be considered identical only limiting considering part of the overall information and taking as unchanged a series of factors. This process determines an individual representation which have just to be coherent with the world. Only in abstract world contexts are objective situations. In the real world, they are just hypothesis to be continuously tested. This vision of bounds and learning has many implications for the debate on rationality and rule following.

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Tipping on room service when delivery fee and service charge are included - Decision Science News

Tipping on room service when delivery fee and service charge are included - Decision Science News | Bounded Rationality and Beyond | Scoop.it
Tipping: room service bills often includes a "delivery charge" of a few dollars plus a "service charge" of close to 20%. Should you tip more?
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Consciousness in humans and non-human animals: Recent advances and future directions

This joint article reflects the authors’ personal views regarding noteworthy advances in the neuroscience of consciousness in the last ten years, and suggests what we feel may be promising future directions. (...) we summarize recent advances in our understanding of subjectivity in humans and other animals, including empirical, applied, technical and conceptual insights. These include the evidence for the importance of fronto-parietal connectivity and of feedback processes, both of which enable information to travel across distant cortical areas effectively, as well as numerous dissociations between consciousness and cognitive functions, such as attention, in humans. In addition, we describe the development of mental imagery paradigms, which made it possible to identify covert awareness in non-responsive subjects. Non-human animal consciousness research has also witnessed substantial advances on the specific role of cortical areas and higher order thalamus for consciousness, thanks to important technological advances. In addition, much progress has been made in the understanding of non-vertebrate cognition relevant to possible conscious states. Finally, major advances have been made in theories of consciousness, and also in their comparison with the available evidence. Along with reviewing these findings, each author suggests future avenues for research in their field of investigation.

 

Consciousness in humans and non-human animals: Recent advances and future directions.
Melanie Boly, Anil K. Seth, Melanie Wilke, Paul Ingmundson, Bernard Baars, Steven Laureys, David Edelman and Naotsugu Tsuchiya

Front. Psychol. | http://dx.doi.org/10.3389/fpsyg.2013.00625


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Miguel Garcia's curator insight, August 30, 2013 11:14 AM

I like the development of mental imagery paradigms as a key to subjectivity. 

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Controlling Self-Organizing Dynamics on Networks Using Models that Self-Organize

Controlling Self-Organizing Dynamics on Networks Using Models that Self-Organize | Bounded Rationality and Beyond | Scoop.it

Controlling self-organizing systems is challenging because the system responds to the controller. Here, we develop a model that captures the essential self-organizing mechanisms of Bak-Tang-Wiesenfeld (BTW) sandpiles on networks, a self-organized critical (SOC) system. This model enables studying a simple control scheme that determines the frequency of cascades and that shapes systemic risk. We show that optimal strategies exist for generic cost functions and that controlling a subcritical system may drive it to criticality. This approach could enable controlling other self-organizing systems.

 

Controlling Self-Organizing Dynamics on Networks Using Models that Self-Organize

Pierre-André Noël, Charles D. Brummitt, and Raissa M. D’Souza

Phys. Rev. Lett. 111, 078701 (2013)

http://dx.doi.org/10.1103/PhysRevLett.111.078701


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Scientists Have Figured Out A New Way To Predict Our Decisions

Scientists Have Figured Out A New Way To Predict Our Decisions | Bounded Rationality and Beyond | Scoop.it
Researchers from CalTech and Stanford have taken a step towards using brain scans to predict the choices people will make.
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