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Rationality

In: A Case-Based Approach to Game Theory

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  • Rohit Prasad

    (Management Development Institute Gurugaon, Economics and Public Policy)

Abstract

This chapter motivates the study of game theory by introducing its foundational assumption: rationality, or self-interested behaviour. It explores both the value and limitations of this assumption, showing how the pursuit of individual interest can lead to collective action failures like the Prisoners’ Dilemma. The chapter demonstrates how dominant strategy solutions work and applies this reasoning to diverse real-world situations—India-China rivalry, the telecom price war, and the Maoist insurgency. It also interrogates whether game theory is value-neutral or subtly ideological, drawing on examples like the Trump-Kim peace talks. The reluctance to abandon rationality, despite its paradoxes, suggests that it may be more than a simplifying assumption—it may be a credo of the discipline.

Suggested Citation

  • Rohit Prasad, 2026. "Rationality," Springer Texts in Business and Economics, in: A Case-Based Approach to Game Theory, chapter 1, pages 1-28, Springer.
    • Handle: RePEc:spr:sptchp:978-981-95-4302-1_1
    DOI: 10.1007/978-981-95-4302-1_1
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