On the Importance of Correlations in Rational Choice: A Case for Non-Nashian Game Theory

Abstract: The Nash equilibrium paradigm, and Rational Choice Theory in general, rely on agents acting independently from each other. This note shows how this assumption is crucial in the definition of Rational Choice Theory. It explains how a consistent Alternate Rational Choice Theory, as suggested by Jean-Pierre Dupuy, can be built on the exact opposite assumption, and how it provides a viable account for alternate, actually observed behavior of rational agents that is based on correlations between their decisions. The end goal of this note is three-fold: (i) to motivate that the Perfect Prediction Equilibrium, implementing Dupuy's notion of projected time and previously called "projected equilibrium", is a reasonable approach in certain real situations and a meaningful complement to the Nash paradigm, (ii) to summarize common misconceptions about this equilibrium, and (iii) to give a concise motivation for future research on non-Nashian game theory.