Though behavioural economics has been popularized over the past decade in both industry and pop culture, it seems that not much has changed with regard to the standard economic definition of rationality.

This is because for the most part (in my view and experience with my professors) it seems to have been irrelevant or unconvincing for the game theorists who deal with very similar theory to the behavioural economists. This is where a "super-micro" theory of consumer and prodoucer behaviour is generated and analysis takes place.

Now im not a huge fan of behavioural economics, but points like discontinous time preferences and prospect theory are useful for adding a degree of realism to models.

This all being said, (except for a few articles on behavioural game theory) why has a large chunk of young game theorists decided to stay away from "behavioural" elements?

  • $\begingroup$ This is interesting because a large chunk of behavioural economics basically states that some rational expectations assumptions are violated in many cases, so there is incentive to avoid these behavioural elements. I would imagine the effect on the “standard economic definition of rationality” will be updated in certain areas as the postulations from behavioural econ are rigorously defined. Hard to include a lot of the implications in standard models. Plus, its not to say that the current models are wrong, more so to say that they can be made better. Definitely following this question! $\endgroup$ – Brennan Aug 25 at 23:14
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    $\begingroup$ Perhaps this commentary on Thaler's Nobel Prize will give you an angle. $\endgroup$ – Herr K. Aug 26 at 17:56

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