Analogies and theories: The role of simplicity and the emergence of norms |
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| Institution: | 1. Bar-Ilan University, Israel;2. HEC, Paris, France;3. Tel-Aviv University, Israel;1. Faculty of Civil Engineering, Slovak University of Technology, Radlinského 11, 813 68 Bratislava, Slovakia;2. UTIA CAS, Pod Vodárenskou věží 4, 182 08 Prague, Czech Republic;3. School of Sciences, Communication University of China, Beijing 100024, China;4. Singidunum University, 11000 Belgrade, Serbia;5. Óbuda University, H-1034 Budapest, Hungary;1. Research Group in Economic Analysis, Facultade de Económicas, Universidade de Vigo, 36310, Vigo, Pontevedra, Spain;2. Universitat Autònoma de Barcelona and Barcelona Graduate School of Economics, Departament d''Economia i d''Història Econòmica, Campus UAB, Edifici B, 08193, Bellaterra, Barcelona, Spain;3. Instituto de Matemática Aplicada de San Luis, Universidad Nacional de San Luis and CONICET, Ejército de los Andes 950, 5700, San Luis, Argentina;1. Faculty of Industrial Engineering and Management, Technion – Israel Institute of Technology, Israel;2. Nuffield College and Department of Economics, University of Oxford, United Kingdom;1. RIKEN, 2-1 Hirosawa, Wako, Saitama 351-0198, Japan;2. Department of Mechanical Convergence Engineering, Institute of Nano Science and Technology, Hanyang University, 17 Haendang-dong, Seongdong-gu, Seoul 133-791, South Korea |
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| Abstract: | We consider the dynamics of reasoning by general rules (theories) and by specific cases (analogies). When an agent faces an exogenous process, we show that, under mild conditions, if reality happens to be simple, the agent will converge to adopt a theory and discard analogical thinking. If, however, reality is complex, analogical reasoning is unlikely to disappear. By contrast, when the agent is a player in a large population coordination game, and the process is generated by all playersʼ predictions, convergence to a theory is much more likely. This may explain how a large population of players selects an equilibrium in such a game, and how social norms emerge. Mixed cases, involving noisy endogenous processes are likely to give rise to complex dynamics of reasoning, switching between theories and analogies. |
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| Keywords: | Case-based reasoning Rule-based reasoning Model selection Social norms Equilibrium selection |
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