POL380Y1 Lecture Notes - Homo Economicus, Nash Equilibrium, Consistency
Document Summary
In the social sciences a rational decision is one that is considered optimal or utility-maximizing. Utility is a term used in economics to denote the total satisfaction that an actor derives from the goods and services that they consume. Individuals, firms and states are considered rational if they pursue their interests in a utility maximizing fashion. Homo economicus, or economic man, is logically consistent but amoral states are economic states, and they are economic actors, meaning that they are logically consistent and amoral. Jarvis reading: move beyond assuming that actors will maximize their pay-offs, there are many variables that affect how that decision is made. Game theory is the formal study of conflict and cooperation. Game theoretic concepts apply whenever the actions of several agents are interdependent. Concepts of game theory provide a language to formulate, structure, analyze, and understand strategic scenarios. Under the probability of another actor taking that action.