Business Intelligence

Rationalizable Strategic Behavior And The Problem Of Perfection

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Executive Summary

This paper explores the fundamental problem of what can be inferred about the outcome of a noncooperative game, from the rationality of the players and from the information they possess. The answer is summarized in a solution concept called rationalizability. Strategy profiles that are rationalizable are not always Nash equilibria; conversely, the information in an extensive form game often allows certain "Unreasonable" Nash equilibria to be excluded from the set of rationalizable profiles. A stronger form of rationalizability is appropriate if players are known to be not merely "Rational" but also "Cautious."

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