This lecture defines rationality in a game theoretical context.
Takeaway Points
- Preferences are rational if they are complete and transitive. This makes the game theoretical definition of rational different from colloquial definition; rationality is not the same thing as sensibility.
- You can chart rational preferences with an ordering, which is simply a list that has the most preferred outcome on top and progressively less preferred outcomes running down.
- Be careful with group preferences: aggregating individuals who each have rational preferences may result in irrational group preferences.
