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Can you please help me find this topic in Mechanism design/Rational choice theory?

I think you're referring to the decoy effect. A popular example of this is the Economist subscription puzzle, popularized in Dan Ariely's TED Talk (starting at 12:22).
Herr K.'s user avatar
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Do people really care about higher moments?

Perhaps there is some evidence toward your claim, but I would argue that in most situations, people do not use point estimates (although some "smoothing" likely occurs). In particular, there is no ...
201p's user avatar
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2 votes

Luce Choice Axiom, Quantal Response Equilibrium

A few quotes from Jessie and Saari (2015) may be of interest. Regarding Luce Choice Axiom (LCA): The effect of LCA is to endow each alternative with an intrinsic level of likelihood that is ...
Herr K.'s user avatar
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Bounded rationality with Quantal Response Equilibrium model for an Extensive Form game

I'm not sure what capacity allocation games you're applying QRE to. But here's a very stylized example where QRE is applied to an asymmetric game where the strategy spaces of the two players are (...
Herr K.'s user avatar
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2 votes
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Was there resistance, historically, to the idea that human behavior deviates from rational decision making theory?

I would recommend reading Thaler's Misbehaving, which chronicles the development of behavioral economics as a field and its struggle to gain recognition by mainstream economists. Several of its ...
Herr K.'s user avatar
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Why does a model that is used for policy analysis needs its shocks and parameters to be structural (= invariant) to the shock under consideration?

This is due to the famous Lucas critique. To make long story short, in the past in the heyday of Keynesian macroeconomics it was quite normal for macroeconomists to just postulate some relationships ...
1muflon1's user avatar
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2 votes
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What is the difference between a perfect foresight equilibrium and a rational expections equilibrium?

This is not a formal definition, but a useful piece of intuition. I think that the best way to think about it is that when there is uncertainty in a model it arises mainly in two forms either there ...
Regio's user avatar
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1 vote
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Expectational stability: adaptive learning of RE equilibria in dynamic systems

These are many questions. O.k., so let's go step by step: (Q1) What is a mapping actually? A map is just another term for a function. Here, every "law of motion", the actual one (ALM) and the ...
VARulle's user avatar
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1 vote
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Difference between equilibrium and k-rationalizability

What is meant by fixed point reasoning here? Specifically, Nash equilibria. One way to define a Nash equilibrium in words is "a strategy profile from which no player can be made better-off by ...
heh's user avatar
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1 vote

Sunk cost fallacy- is it a bug or a feature?

Very interesting question. To answer the direct question in the title, I'd say I'd have to break the sunk cost fallacy into two arenas. In the first I'd say it is a feature not a bug, but in the ...
user20097's user avatar
1 vote

Do people really care about higher moments?

I think there is a missing concept in your question. If you are discussing simple gambles and not things like the stock market, then the distributions that are involved usually have sufficient ...
Dave Harris's user avatar
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1 vote

Topological concepts in economic theory

Beside the work of Chichilnisky mentioned by Michael, another interesting use of topology in social choice theory appears in the work of Redekop on Arrow's theorem on economic domains. Redekop, J. (...
Martin Van der Linden's user avatar

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