What Automaton Model Captures Decision Making? The Necessity of Behavioral Complexity

When investigating bounded rationality, economists favor automaton models of Chomsky Type-3 as a model for human decision making over other concepts. Chomsky Type-3 automaton models are especially suited for (repetitions of) decision problems with limited strategy sets and players. In this paper, we discuss the limitations of different automaton models when capturing human decision making. Thereby, we give an overview over different economic decision problems, with a focus on individual decision making and game-theory. We argue that lower Chomsky types than Type-3 are necessary to model human decision making and that extensions of existing automaton models are necessary to capture the specifics of human decision making. Corresponding models are necessary to make progress in economic modeling as most existing models neglect the bounded capabilities of humans and therefore fail to make solid predictions.