What Does Rationality Mean?

This lecture defines game theoretical "rationality."

Takeaway Points

  1. In every day langauge, "rational" is a synonym of "sensible." This is not the case in game theory.
  2. A player is rational if his preferences are complete and transitive.
  3. This definition is extremely inclusive, allowing us to investigate the behavior of seemingly "irrational" agents such as suicide terrorists.
  4. We also require players to fulfill the independence over lotteries and continuity axioms so that expected utilities work properly.