This is a paperback edition of a major contribution to the field, first published in hard covers in 1977. The book outlines a general theory of rational behaviour consisting of individual decision theory, ethics, and game theory as its main branches. Decision theory deals with a rational pursuit of individual utility; ethics with a rational pursuit of the common interests of society; and game theory with an interaction of two or more rational individuals, each pursuing his own interests in a rational manner.

associated with each end point are indicated) gives full information about the rules of the game and also about the players' utility functions (as far as these are relevant for analyzing the game), we can also define a game with complete information as a game in which the players know all the information displayed by the game tree. In particular, in a game with complete information the players will know the objective probabilities associated with various possible outcomes of any chance move

you a higher payoff than o would.) Part II. Letj3 = (j8 1 ,. . . ,ft,. . . ,pn) and 0* = (fr *, . . . ,ft*, . . . ,ft,*)be two possible ^-tuples of bargaining strategies for the n players, both of them consistent with our other rationality postulates, but j3* yielding you (player /) a higher payoff than 0 would. Suppose that, in the absence of any special agreement to the contrary, you and all the other players would use bargaining strategies corresponding to the «-tuple j3. Then you must be

strategy-coordination problem, if G contains at least one set 2 * of mutually equivalent, but not strictly coeffective, strategy ^-tuples a 1 , . . . , a*, . . . . The strategy-coordination problem arises from the fact that, even if all players agreed to try to achieve the payoff vector u = U(ol) = • • • = U(ok) = • • • corresponding to these strategy ^-tuples, in general they could actually achieve this payoff vector u only if they managed somehow to coordinate their strategies, i.e., if either

situations, see Section 6.2) A3. Subjective-best-reply postulate (Bayesian expected-utility maximization postulate). In a bargaining game B(G) associated with a game G profitable to you, as far 154 Solutions for specific classes of games as your binding agreements with the other players allow, always use a bargaining strategy j3/ representing your subjective best reply to the mean bargaining-strategy combination /? that you expect the other players to use. A4. Acceptance-of-higher-payoffs

criterion for rational behavior in bargaining situations. The criterion at which we will arrive will be a decision rule first proposed by Zeuthen [1930, Chap. IV], which we shall call Zeuthen 's Principle. It essentially says that at any given stage of bargaining between two rational players the next concession must always come from the party less willing to risk a conflict - if each party's willingness to risk a conflict is measured by the highest probability of conflict that he would be