THE RELEVANCE OF QUASI RATIONALITY IN COMPETITIVE MARKETS

Abstract

Smart My dad gave me one dollar bill ‘cause I'm his smartest son, And I swapped it for two shiny quarters ‘cause two is more than one! And then I took the quarters And traded them to Lou For three dimes – I guess he don't know That three is more than two! Just then, along came old blind Bates And just ‘cause he can't see He gave me four nickels for my three dimes And four is more than three! And I took the nickels to Hiram Coombs Down at the seed-feed store, And the fool gave me five pennies for them, And five is more than four! And then I went and showed my dad, And he got red in the cheeks And closed his eyes and shook his head – Too proud of me to speak! Shel Silverstein Where the Sidewalk Ends Copyright © 1974 by Snake Eye Music, Inc. New York: Harper & Row, 1974 (Reproduced with permission of the publisher) Economists generally attribute considerable rationality to the agents in their models. The recent popularity of rational expectations models is more an example of a general tendency than a radical departure. Since rationality is simply assumed , there is little in the literature to suggest what would happen if some agents were not rational.