Regular Game Theory Has Difficulty to Deal with Bounded Rationality
Jaap de Jonge, Management Consultant, Netherlands
Indeed game theory usually starts with rather strong premises. Preferences are represented by utilities, beliefs are represented by probabilities and common knowledge and symmetric rationality as background assumptions are treated as “given.”
Unfortunately, this is empirically not the situation we face in managing organizations and in society in general.
Subjective games are meant to accommodate such irrationality.