Thursday, 25 August 2011

Playing with a madman (Baltag at LGS7)



Like all theories, game theory has its own simplifying assumptions. One of these is the rationality of players, that is: a player, like a true homo oeconomicus will maximise its payoff. As a result the outcome of a noncooperative game will be a Nash equilibrium since it consists of best responses to other players' strategies. But then how should we play the game when the opponent is not rational, especially if she has already made irrational choices?