ABSTRACT
In chapters 4 and 5 we explained how behavioural economists have broadened the foundations of standard economic models by allowing interactions with others. Behavioural learning theories allow that people do not know the best strategy immediately and so they acquire knowledge via some process of learning, including social learning from others’ actions (chapter 4). Other behavioural economists focus on extending standard utility functions by allowing for sociality – people are affected by social preferences, rewards and interactions (chapter 5). These models of learning and sociality embed an implicit or explicit rationality assumption generally involving the application of mathematical algorithms to enable good decision-making.
