Bounded rationality Ballester, Coralio Hernández, Penélope Bounded rationality Behavior Schelling's segregation model Information The observation of the actual behavior by economic decision makers in the lab and in the field justifies that bounded rationality has been a generally accepted assumption in many socio-economic models. The goal of this paper is to illustrate the difficulties involved in providing a correct definition of what a rational (or irrational) agent is. In this paper we describe two frameworks that employ different approaches for analyzing bounded rationality. The first is a spatial segregation set-up that encompasses two optimization methodologies: backward induction and forward induction. The main result is that, even under the same state of knowledge, rational and non-rational agents may match their actions. The second framework elaborates on the relationship between irrationality and informational restrictions. We use the beauty contest (Nagel, 1995) as a device to explain this relationship. 2014-05-06T06:33:07Z 2014-05-06T06:33:07Z 2010 info:eu-repo/semantics/report Ballester, C.; Hernández, P. Bounded rationality. Universidad de Granada. Departamento de Teoría e Historia Económica (2010). (The Papers; 10/10). [http://hdl.handle.net/10481/31567] http://hdl.handle.net/10481/31567 eng The Papers;10/10 http://creativecommons.org/licenses/by-nc-nd/3.0/ info:eu-repo/semantics/openAccess Creative Commons Attribution-NonCommercial-NoDerivs 3.0 License Universidad de Granada. Departamento de Teoría e Historia Económica