Rationality and Strategic Games (Honors)
Economists typically assume that individuals behave "rationally;" that is, they take action as long as the benefits outweigh the costs. This rational decision-making becomes more complex when the benefits or costs of an action are uncertain. This uncertainty may be due to incomplete information or inherent risk, or, as is often the case, it may be due to strategic interdependence of actions, where the desirability of different choices are dependent on what other rational people choose. Such strategic interactions range from roommates deciding whether to do the dishes to countries deciding whether to provoke nuclear war. Understanding the implications of rational behavior in these situations can help individuals better negotiate the many such interactions they face every day and can also be used to predict outcomes and, potentially, alter them when the predicted results may be socially undesirable.
This course will introduce students to Game Theory-a framework for understanding and analyzing decision-making in a strategic environment. The focus of analysis will be social dilemmas (e.g. the Prisoners' Dilemma, the Tragedy of the Commons) in which individually rational behavior may lead to undesirable outcomes. By understanding the nature of these dilemmas, we can then use our game-theoretic framework to analyze how the dilemmas can be "solved" and how cooperative behavior can emerge even in situations where strategic incentives may be to behave non-cooperatively. Throughout the course, we will explicitly discuss the validity of the assumption of rationality and the effects of seemingly irrational (yet nonetheless often predictable) behavior on choices and outcomes in strategic games.
The insights from this analysis are broadly applicable understanding behavior in a wide range of strategic relationships--interpersonal interactions, the dynamics of family behavior, individuals' decisions within a community, and political interactions within and between countries-allowing us to extend discussion of several of the themes of PACS 01.
