Agent-based modeling (ABM) may provide a computational testbed for mechanism design using concepts of bounded rationality (BR). ABM can be used to systematically derive and formalize different models of BR. This allows us to identify the cognitive preconditions for behavior intended by the mechanism and thereby to derive implications for the design of mechanisms. This project describes systematic ways in which to derive BR agents for research questions where behavioral aspects might matter. We show that BR concepts may lead to other outcomes than the intended effect of mechanism design theory. The presented BR concepts as simulated by agent models cannot model human behavior in its full complexity. The simplification of complex human behavior is a useful analytical construct for the controlled analysis of a few aspects and an understanding of the potential consequences of those aspects of human behavior for mechanism design.

Publications

Lorscheid, I. and Meyer, M. (2017), “Agent-based mechanism design – investigating bounded rationality concepts in a budgeting context”, Team Performance Management, Vol. 23 Nos 1/2, pp. 13-27.