Rationality and Coalition Formation Experiments

Abstract

A primary purpose of the theory of games (von Neumann & Morgenstern, 1947) is to develop criteria for rational behavior in group situations that involve partial or total conflict of interests between two or more players. When the interests of the players are partially opposed and partially coincident, the term “rationality” is far from precise as is evident, for example, in the Prisoner’s Dilemma game (Luce & Raiffa, 1957) in which two or more players, in pursuing their own ends, are forced into a mutually undesirable position. It is commonly agreed that there is no point in insisting on a single definition of “rationality”, nor is there a reason for lamenting the impreciseness of this term. Paradoxically, it is that impreciseness that has enhanced our understanding of the logical structure of conflict situations by motivating the development of a multitude of mathematical models, each of which provides a different explication of “rational behavior.”