Draft: On Concepts of Rationality in Games (original) (raw)
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Rationality in games and institutions
Synthese, 2021
Against the orthodox view of the Nash equilibrium as “the embodiment of the idea that economic agents are rational” (Aumann, 1985, 43), some theorists have proposed ‘non-classical’ concepts of rationality in games, arguing that rational agents should be capable of improving upon inefficient equilibrium outcomes. This paper considers some implications of these proposals for economic theory, by focusing on institutional design. I argue that revisionist concepts of rationality conflict with the constraint that institutions should be designed to be incentive-compatible, that is, that they should implement social goals in equilibrium. To resolve this conflict, proponents of revisionist concepts face a choice between three options: (1.) reject incentive compatibility as a general constraint, (2.) deny that individuals interacting through the designed institutions are rational, or (3.) accept that their concepts do not cover institutional design. I critically discuss these options and I argue that a more inclusive concept of rationality, e.g. the one provided by Robert Sugden’s version of team reasoning, holds the most promise for the non-classical project, yielding a novel argument for incentive compatibility as a general constraint.
Economic Rationality: An Evaluation
The neoclassical thought constitute the base of the most dominant school in the discipline of economics, and economic rationality of an individual agent is the principal postulate of such a thought associated with neoclassical economics. The postulate of rationality has been questioned over the years. There have always been doubts expressed against such a conception of the individual human actor transacting business in a market. The theoretical postulate has often been pitched against not only the alternative theoretical frameworks but also the empirical judgments arrived at in the background of a broader canvas of the actual social economy.
Rational After All: Toward an Improved Model of Rationality in Economics
2011
In this paper we critically review the literature on rational choice theory (RCT) and the critical approaches to it. We will present a concise description of the theory as defended by Gary Becker, Richard Posner and James Coleman (as well as others) at the University of Chicago from the mid-1970s to the early 1990s, we will discuss its epistemological assumptions and predictions and we will also examine the most important arguments against it. We will give our main emphasis on the critique coming from behavioral economics and we will try to see if humans’ supposed cognitive constraints lead to a failure of rationality or if they constitute rational responses to the scarcity of information, time and energy. In our discussion we will use findings from experimental economics and the sciences of the brain, especially evolutionary psychology and neuroeconomics. Our intention is to present an improved theory of rational choice that, informed from the above discussion, will be descriptively more accurate but without losing its predicting power. Moreover, we will conclude by trying to answer the most important related policy question: when rationality seems to fail, does this necessarily imply that agents should be paternalistically protected against themselves? We will briefly defend the thesis that, in the long-run, it is much better for them and the society at large for the individual decision makers to be let alone to develop rational responses to their cognitive constraints. Keywords: Rational Choice Theory, Behavioral Economics, Evolutionary Psychology, Rationality, Cognition, Paternalism JEL Classification: A10, A12, D01, D03, B41, D81
Rationalizable Strategic Behavior
Econometrica, 1984
RATIONALIZABLE STRATEGIC BEHAVIOR This paper examines the nature of rational choice in strategic games. Although there are many reasons why an agent might select a Nash equilibrium strategy in a particular game, rationality alone does not require him to do so. A natural extension of widely accepted axioms for rational choice under uncertainty to strategic environments generates an alternative class of strategies, labelled "rationalizable." It is argued that no rationalizable strategy can be discarded on the basis of rationality alone, and that all rationally justifiable strategies are members of the rationalizable set. The properties of rationalizable strategies are studied, and refinements are considered.
Reconstructing the Concept of Rationality in Economics
“Rational Choice Theory is taken as the only form of rationality and has resulted in many deficiencies in economics. Economics, through rational choice theory, has reduced individuals to means-end rational alone. Rationality has a world of contradictions within itself and by incorporating the different forms in which rationality manifests itself improves our understanding of the economic sphere. The purpose of our paper is to critique the orthodox understanding of rationality and use a variety of literature to enrich the concept of rationality in economics in the multiplicity of ways it manifests itself.”
Interpretations and Theoretical Uses of the Concept of Rationality in Economics
Economic theory has focused on trying to account for the behavior of agents and the results that such performance will have in aggregate terms. Using several assumptions theory has come to build agent archetypes, in search for the most appropriate and possible representation for such behavior. One of the least analyzed but fundamental assumptions are related to the rationality. This term has had different definitions. At first it was treated as a simple capability of reasoning, then it gradually turned into the idea of a gifted agent able to construct sophisticated models in his/ her mind (hyper-rational), to finally result in the idea of a social construction process (procedural rationality). This paper aims to briefly explain each interpretation, as well as to describe the theoretical implications for each one, arguing that it is a fundamental assumption which must be explained even more clearly than it has been so far. Equidad Desarro. ISSN 1692-7311 • N.º 23: 223-240 • enero-junio del 2015
The Concept of Rationality in Neoclassical and Behavioural Economic Theory
Modern Applied Science, 2014
Theories that are based on the neoclassical basis such as expected utility theory or the theory of efficient markets assume rational choice of subjects in the sense of an optimal choice according to the criteria of neo-classical economics. Behavioral theory such as prospect theory assumes limited rationality in the choice of subjects. In this research the problem of choosing subjects is treated differently. The aim of this paper is to attempt a comparison between two basic approaches of contemporary economic theories that are applied in the financial markets, but also in other spheres of economic activity (public economics).
THE "RATIONALITY" CRITERIA IN DECISION MAKING THEORIES AND THE GAME THEORY
The decision-making process is a process explored by many different disciplines and handled in many different ways. This process, which is also the subject of economics, is discussed in terms of rationality criterion in economic literature. Some models considered that the decision-maker is rational, however some models rejected rationality. In this study, decision making theories are discussed in terms of rationality, and the Game Theory, which is a phenomenon, has been explained.
Advances in Intelligent Systems and Computing, 2018
We are interested in game-theoretic models of (bounded) rationality, and specifically in investigating (in)adequacy of the traditional models of rational behavior in strategic encounters – models such as Nash Equilibria and other “solution concepts” from the classical game theory. We argue that classical game theory arose in the historical and social context dominated by the Cold War and interest in zero-sum games, leading to solution concepts appropriate for the competitive games (either strictly competitive or at least, “close to being zero-sum”), but that have been found to be woefully inadequate when applied to certain 2-player games that are “far away” from being zero-sum, that is, farther along the spectrum ranging from strict competition to complete cooperation. We share some insights and our (perhaps in some cases provocative!) thoughts inspired by both prior research on an interesting 2-player game, Iterated Traveler’s Dilemma, and recent political developments in the Unite...