Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/37043
Authors: 
Pope, Robin
Selten, Reinhard
Kube, Sebastian
Year of Publication: 
2009
Series/Report no.: 
Bonn econ discussion papers 2009,17
Abstract: 
This paper introduces a new theoretic entity, a nominalist heuristic, defined as a focus on prominent numbers, indices or ratios. Abstractions used in the evaluation stage of decision making typically involve nominalist heuristics that are incompatible with expected utility theory which excludes the evaluation stage, and are also incompatible with prospect theory which assumes that, while the evaluation procedure can involve systematic mistakes, the overall decision situation is nevertheless sufficiently simple: 1) for economists and psychologists to identify what is a mistake, and 2) to be compatible with maximisation. But in the typical complex situation giving rise to nominalist heuristics neither 1) nor 2) hold, and therefore what is required is a fundamentally different class of models that allow for the progressive anticipated changes in knowledge ahead faced under risk and uncertainty, namely models under the umbrella of SKAT, the Stages of Knowledge Ahead Theory. A sequel paper. Pope et al 2009b, shows field and laboratory evidence of heuristics in the form of prominent numbers entering exchange rate determination.
Subjects: 
nominalism
money illusion
heuristic
unpredictability
experiment
SKAT the Stages of Knowledge Ahead Theory
prominent numbers
prominent indices
prominent ratios
equality
historical benchmarks
complexity
decision costs
evaluation
JEL: 
D800
D810
F310
F330
Document Type: 
Working Paper

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