Social Rationalizability

Social environments constitute a framework in which it is possible to study how groups of agents interact in a society. The framework is general enough to analyse both noncooperative and cooperative games. We identify a number of shortcomings of existing solution concepts that are used for social environments and propose a new concept called social rationalizability. The concept aims to identify the consequences of common knowledge of rationality and farsightedness within the framework of social environments. The set of socially rationalizable outcomes is shown to be non-empty for all social environments and it can be computed by an iterative reduction procedure. We introduce a de nition of coalitional rationality for social environments and show that it is satis ed by social rationalizability.