RATIONAL CHOICE

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10 Terms

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rationality assumption

It is the attempt to understand societal behaviors using rational actors as the basis for rational choice theory.
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What does rational choice theory state about individuals?
It states that individuals are motivated by personal wants and goals and must make trade-offs due to limited resources.
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How do rational choice theorists view human interactions?
They believe that human interactions can be understood as exchanges of resources, much like in economic transactions.
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What is methodological individualism?
It is the concept that the smallest unit of social condition is the individual human's action.
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What do rational choice theorists conclude about institutions?
They conclude that institutions must be self-enforcing to be effective in the absence of authority.
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What is Adam Smith's contribution to rational choice theory?
He developed the idea of the invisible hand, suggesting that self-interests of rational actors can create positive benefits for the economy.
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What are the three classifications of games in game theory?
Purely cooperative games, purely competitive games, and mixed games.
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What is the prisoners’ dilemma?
It is a game where two players may end up worse off if they act solely in their self-interest rather than cooperating.
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What is Nash equilibrium?
A situation where each player's strategy is optimal, and no player has an incentive to change their strategy unilaterally.
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How do weak institutions affect individual actions?
Weak institutions lead to instability and can cause people to break agreements in the absence of authority.