Rajiv Sarin | University of Exeter

We build a dynamic model of satisficing behavior. We explicitly introduce the payoff the decision maker "expects" from a strategy, where this expectation is adaptively formed. If the agent receives a payoff above her satisficing level she continues with the current action, updating what she expects from it. If she receives a payoff below her satisficing level and what she expects from the action falls below her satisficing level she updates both her satisficing level and what she expects from the strategy she has chosen. We show that in decision problem such satisficing behavior results in cautious choice. In games, we show that both risk dominant and payoff dominant choices may result. Both the cooperate only profile and defect only profile are equilibria in the Prisoner's Dilemma.

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