Perfect rationality
In economics and game theory, it is sometimes assumed that agents have perfect rationality: that is, they always act in a way that maximizes their utility, and are capable of arbitrarily complex deductions towards that end. They will always be capable of thinking through all possible outcomes and choosing that course of action which will result in the best possible outcome.
Perfect rationality is often contrasted to bounded rationality, which assumes that practical elements such as cognitive and time limitations restrict the rationality of agents.
Perfect rationality is similar to the concept of homo economicus but is more commonly used in the field of game theory. However it focuses more on the ability of agents to always make mathematically perfect deductions than on agents being self-interested: since the utility function could theoretically take any form, even be linked to the utility of other agents such as one's wife or children, perfect rationality could even be made compatible with the concept of homo reciprocans.
See also
- Rationality
- Rational choice theory
- Superrationality
- Homo economicus
- Bounded rationality
- Dynamic inconsistency
- Rationality and power
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