Incorporating Behavioral Assumptions into Game Theory

The standard approach to making predictions in noncooperative game theory is to invoke internal consistency: Behavior is only ruled out when we can argue that if players came to believe in the behavior, then at least one player would wish to deviate. Such internal-consistency arguments clearly underlie the solution concepts Nash equilibrium and rationalizability, and arguably underlie most prevalent game-theoretic solution concepts.By now, most of us perceive an apparent shortcoming of this approach to noncooperative game theory: Using even the most strained arguments about what rationality implies, analyses of many games do not yield sharp predictions.