Year: 2015
Type: preprint
Abstract: We develop a model to study the role of rationality in economics and biology. The model's agents differ continuously in their ability to make rational choices. The agents' objective is to ensure their individual survival over time or, equivalently, to maximize profits. In equilibrium, however, rational agents who maximize their objective survival probability are, individually and collectively, eliminated by the forces of competition. Instead of rationality, there emerges a unique distribution of irrational players who are individually not fit for the struggle of survival. The selection of irrational players over rational ones relies on the fact that all rational players coordinate on the same optimal action, which leaves them collectively undiversified and thus vulnerable to aggregate risks.
Author: Kuhle, Wolfgang
Institution: Max Planck Institute for Behavioral Economics
Language: English
Topic: Game Theory and Applications
Field: Decision Sciences
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W3123357446