RATIONAL CHOICE

rationality assumption

It is the attempt to understand societal behaviors using rational actors as the basis for rational choice theory.

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.

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.

What is methodological individualism?

It is the concept that the smallest unit of social condition is the individual human's action.

What do rational choice theorists conclude about institutions?

They conclude that institutions must be self-enforcing to be effective in the absence of authority.

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.

What are the three classifications of games in game theory?

Purely cooperative games, purely competitive games, and mixed games.

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.

What is Nash equilibrium?

A situation where each player's strategy is optimal, and no player has an incentive to change their strategy unilaterally.

How do weak institutions affect individual actions?

Weak institutions lead to instability and can cause people to break agreements in the absence of authority.