Advances in Understanding Rational Behavior

Abstract

It will be argued that economic theory, decision theory and some recent work in game theory, make important contributions to a deeper understanding of the concept of rational behavior. The paper starts with a discussion of the common-sense notion of rational behavior. Then, the rationality concepts of classical economics and of Bayesian decision theory are described. Finally, some (mostly fairly recent) advances in game theory are briefly discussed, such as probabilistic models for games with incomplete information; the role of equilibrium points in non-cooperative games, and the standard game-theoretical approach to the prisoner’s dilemma problem; the concept of perfect equilibrium points; the use of non-cooperative bargaining models in analyzing cooperative games; and the Harsanyi-Selten solution concept for non-cooperative games.

From Logic, Methodology and Philosophy of Science, (ed. by R. Butts and J. Hintikka), D. Reidel, Dordrecht, Holland, to be published.