Perfect rationality
Encyclopedia
In economics
and game theory
, the participants are sometimes considered to have perfect rationality: that is, they always act in a way that maximizes their utility
, and are capable of arbitrarily complex deductions towards that end. They will always be capable of thinking through all possible outcomes and choosing that course of action which will result in the best possible outcome.
Economic rationality is distinct from superrationality
in that it predicts that
rational players will always play a dominant strategy, that is, players never take into account how their decision will be repeated by others. Economic and game-theoretic rationality is completely individualistic.
Economics
Economics is the social science that analyzes the production, distribution, and consumption of goods and services. The term economics comes from the Ancient Greek from + , hence "rules of the house"...
and game theory
Game theory
Game theory is a mathematical method for analyzing calculated circumstances, such as in games, where a person’s success is based upon the choices of others...
, the participants are sometimes considered to have perfect rationality: that is, they always act in a way that maximizes their utility
Utility
In economics, utility is a measure of customer satisfaction, referring to the total satisfaction received by a consumer from consuming a good or service....
, and are capable of arbitrarily complex deductions towards that end. They will always be capable of thinking through all possible outcomes and choosing that course of action which will result in the best possible outcome.
Economic rationality is distinct from superrationality
Superrationality
The concept of superrationality was coined by Douglas Hofstadter, in his article series and book "Metamagical Themas"...
in that it predicts that
rational players will always play a dominant strategy, that is, players never take into account how their decision will be repeated by others. Economic and game-theoretic rationality is completely individualistic.
See also
- RationalityRationalityIn philosophy, rationality is the exercise of reason. It is the manner in which people derive conclusions when considering things deliberately. It also refers to the conformity of one's beliefs with one's reasons for belief, or with one's actions with one's reasons for action...
- Rational choice theoryRational choice theoryRational choice theory, also known as choice theory or rational action theory, is a framework for understanding and often formally modeling social and economic behavior. It is the main theoretical paradigm in the currently-dominant school of microeconomics...
- SuperrationalitySuperrationalityThe concept of superrationality was coined by Douglas Hofstadter, in his article series and book "Metamagical Themas"...
- Homo economicusHomo economicusHomo economicus, or Economic human, is the concept in some economic theories of humans as rational and narrowly self-interested actors who have the ability to make judgments toward their subjectively defined ends...
- Bounded rationalityBounded rationalityBounded rationality is the idea that in decision making, rationality of individuals is limited by the information they have, the cognitive limitations of their minds, and the finite amount of time they have to make a decision...
- Dynamic inconsistencyDynamic inconsistencyIn economics, dynamic inconsistency, or time inconsistency, describes a situation where a decision-maker's preferences change over time in such a way that what is preferred at one point in time is inconsistent with what is preferred at another point in time...
- Rationality and powerRationality and powerRationality and Power: Democracy in Practice is a book authored by Oxford University professor Bent Flyvbjerg and published by The University of Chicago Press . The book is a study of how power influences rationality and democracy. The book's theory and method build on a tradition in power studies...