From Rationality to Irrationality : Dynamic Interacting Structures
Pierre Gosselin, Aïleen Lotz, Marc Wambst
Abstract: This article develops a general method to solve dynamic models of interactions between multiple strategic agents that extends the static model studied previously by the authors. It describes a general model of several interacting agents, their domination relations as well as a graph encoding their information pattern. It provides a general resolution algorithm and discusses the dynamics around the equilibrium. Our model explains apparent irrational or biased individual behaviors as the result of the actions of several goal-specific rational agents. Our main example is a three-agent model describing « the conscious », « the unconscious », and « the body ». We show that, when the unconscious strategically dominates, the equilibrium is unconscious-optimal, but body and conscious-suboptimal. In particular, the unconscious may drive the conscious towards its goals by blurring physical needs. Our results allow for a precise account of agents’ time rate preference. Myopic behavior among agents leads to oscillatory dynamics : each agent, reacting sequentially, adjusts its action to undo other agents’ previous actions. This describes cyclical and apparently inconsistent or irrational behaviors in the dual agent. This cyclicality is present when agents are forward-looking, but can be dampened depending on the conscious sensitivity to other agents’ actions.
Keywords: dual agent; conscious and unconscious, rationality; multi-rationality; emotions; choices
and preferences; multi-agent model; consistency; game theory; strategical advantage.
JEL Classification: B41,D01, D81, D82.
A Dynamic Model of Interactions between Conscious and Unconscious
Pierre Gosselin, Aïleen Lotz
Abstract: This paper advocates that some limits of the rational agent hypothesis result from the improper assumption that one individual should be modeled as a single rational agent. We model an individual composed of two autonomous and interacting structures, conscious and unconscious. Each agent utility form depends both on external signals and other structures’ actions. The perception of the signal depends on its recipient and its grid of interpretation. We study both the static and dynamic version of this interaction mechanism. We show that the dynamics may display instability, depending on the structures interactions’ strength. However, if unconscious has a strategic advantage, greater stability is reached. By manipulating other structures’ goals, the strategic agent can lead the whole system to an equilibrium closer to its own optimum. This result shows that some switch in the conscious’ objective can appear. Behaviors that can’t be explained with a single utility can thus be rational if we add a rational unconscious agent. Our results justify our hypothesis of a rational interacting unconscious. It supports the widening of the notion of rationality to multi-rationnality in interaction.
Keywords: dual agent, conscious and unconscious, rationality, multi-rationality, emotions, choices and preferences, multi-agent model, consistency
JEL Classification: B41,D01, D81, D82
An Economic Approach to the Self: The Dual Agent
Aïleen Lotz
Abstract: This paper extends the notion of the rational agent in economics by acknowledging the role of the unconscious in the agent’s decision-making process. It argues that the unconscious can be modelled by a rational agent with his own objective function and set of information. The combination of both the conscious and unconscious agents is called the « dual agent ».
This dual agent presents rationally biased behaviors that may not disappear through aggregation, and could be potentially measured. It also provides a theoretical approach to the emotionally-driven actions. On the social sciences side, the paper advocates a wider use of hidden rationality in the understanding of human behavior.
Keywords: rational agent, decision-making, conscious and unconscious asymmetry of information, imperfect information, dual agent, theory of emotions, substantive and procedural rationality, psychology, bias
JEL Classification: B41, D01, D81, D82