Stalnaker provided an example of a perfect information game in which common knowledge of rationality does not yield backward induction. However, in his example, knowledge is treated as defeasible: players forfeit their knowledge of rationality at some vertices. This is not how ‘knowledge’ is understood in epistemology where, unlike belief, it is not subject to revision. In this respect, the Sta...

The relations between rationality and optimization have been widely discussed in the wake of Herbert Simon’s work, with the common conclusion that the rationality concept does not imply the optimization principle. The paper is partly concerned with adding evidence for this view, but its main, more challenging objective is to question the converse implication from optimization to rationality, wh...

Is it rational to reduce criminal activities if punishments are increased? While intuition might suggest so, game theory concludes differently. From the game theoretical perspective, inspectors anticipate the effect of increased punishments on criminal behavior and reduce their inspection activities accordingly. This implies that higher punishments reduce inspections and do not affect crime rat...

Stalnaker provided an example of a perfect information game in which common knowledge of rationality does not yield backward induction. However, in his example, knowledge is treated as defeasible: players forfeit their knowledge of rationality at some vertices. This is not how ‘knowledge’ is understood in epistemology where, unlike belief, it is not subject to revision. In this respect, the Sta...