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Evolution and Rationality: Some Recent Game-Theoretic Results

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Economics in a Changing World

Part of the book series: International Economic Association Series ((IEA))

Abstract

A large part of economics, and economic theory in particular, relies on such solution concepts as Nash equilibrium and its refinements. Unfortunately, it is difficult to provide a solid theoretical or empirical justification for Nash equilibrium behaviour. ‘Rationality’, or even ‘common knowledge of rationality’, is not enough to generate such behaviour. Among other things, one also needs to assume that the players coordinate their beliefs about each other’s actions (Armbruster and Boege, 1979; Johansen, 1982; Bernheim, 1984; Pearce, 1984; Bernheim, 1986; Binmore, 1987; Aumann, 1987; Tan and Werlang, 1988; Aumann and Brandenburger, 1991). Moreover, in games with a dynamic structure, the very notion of rationality becomes problematic, and common knowledge of rationality may even lead to logical contradictions (Rosenthal, 1981; Binmore, 1987; Bicchieri, 1989; Basu, 1988, 1990).

This paper was presented at the Tenth World Congress of the International Economic Association Series, Moscow, 24–28 August 1992. We are grateful for comments from Ken Binmore, Jonas Björnerstedt, Jean-Michel Grandmont, Peter Norman, Roy Radner, Susan Scotchmer, Johan Stennek and Karl Wärneryd, as well as from the participants in seminars at the Institute for International Economic Studies, Stockholm University, and at the C.V. Starr Center for Applied Economics, New York University. Banerjee gratefully acknowledges the hospitality of the Institute for International Economic Studies at Stockholm University. Weibull gratefully acknowledges financial support from the Industrial Institute for Economic and Social Research, Stockholm, Sweden, and from the Jan Wallander Research Foundation.

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Author information

Authors and Affiliations

  1. Department of Economics, Harvard University, Cambridge, Massachusetts, USA

    Abhijit Banerjee

  2. Department of Economics, Stockholm School of Economics, Stockholm, Sweden

    Jörgen W. Weibull

  3. Department of Economics, University College London, UK

    Ken Binmore

Authors
  1. Abhijit Banerjee
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  2. Jörgen W. Weibull
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  3. Ken Binmore
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Editor information

Editors and Affiliations

  1. Department of Economics, University of Minnesota, Minneapolis, Minnesota, USA

    Beth Allen

  2. Federal Reserve Bank of Minneapolis, Minneapolis, Minnesota, USA

    Beth Allen

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© 1996 International Economics Association

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Banerjee, A., Weibull, J.W., Binmore, K. (1996). Evolution and Rationality: Some Recent Game-Theoretic Results. In: Allen, B. (eds) Economics in a Changing World. International Economic Association Series. Palgrave Macmillan, London. https://doi.org/10.1007/978-1-349-25168-1_4

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