What are the limitations of game theory?

What are the limitations of game theory?

Game theory has several limitations, including assumptions of rationality, limited information, and simplifications of real-world scenarios.

Can you explain the assumption of rationality?

Sure! The assumption of rationality means that players are expected to make decisions that maximize their utility, which may not always reflect real human behavior.

What about limited information?

Limited information refers to the idea that players may not have access to all relevant data, which can lead to suboptimal decisions.

Are there any real-world examples where game theory fails?

Yes, one example is the 'Prisoner's Dilemma' in situations where trust and cooperation are essential, but players act in self-interest.

How can game theory be improved?

Improvements can include incorporating behavioral economics, considering emotions, and using more complex models that reflect real-world dynamics.