Analogies, adaptation, and anomalies

This payer studies decision makers characterized by a stock of models, or analogies, who respond to strategic interactions by applying what appear to be the most suitable models: balancing the gains from more sophisticated decisionmaking against the cost of placing heavier demands on scarce reasoning resources. Equilibrium models will be finely tuned to interactions, leading to seemingly "rational" behavior, when the interactions are sufficiently important and sufficiently distinct that a more generic model entails a prohibitive payoff reduction. Interactions that are infrequently encountered. relatively unimportant. or similar to other interactions may trigger seemingly inappropriate analogies. leading to behavioral anomalies. (C) 2001 Academic Press.