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Modern and postmodern challenges to game theory

Abstract

Equilibrium game theory borrows from neoclassical economics its rationality concept which it immediately puts to work in order to produce the basic results it needs for building an elaborate narrative of social interaction. This paper focuses on some recent objections to game theory's use of rationality assumptions in general, and of backward induction and subgame perfection in particular, and interprets them in the light of the postmodern critique of the grand meta-narratives which social theorists often rely on for social explanation. The paper presents a defence of game theory which seeks to accommodate the postmodern critique. However, it goes on to show that such a defence is illegitimate and claims that the problem lies with the faulty conceptualisation of the main concept on which game theory rests: that of Reason. Having established the nature of the problem, it considers three alternative interpretations (Humean, postmodern and Hegelian) of why the problem resists logical solutions and of its significance for social theory.

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I am indebted to Bob Sugden for introducing me to rational deviance, to Roberto Finelli for some important associations, to Shaun Hargreaves-Heap for the time we spent arguing about the postmodern condition, and to Joseph Halevi for his dialectical intransigence. Nonetheless, this paper should be blamed entirely on me.

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Varoufakis, Y. Modern and postmodern challenges to game theory. Erkenntnis 38, 371–404 (1993). https://doi.org/10.1007/BF01128237

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Keywords

  • Social Interaction
  • Game Theory
  • Basic Result
  • Social Theorist
  • Alternative Interpretation