| Rationalizability | |
|---|---|
| Solution concept in game theory | |
| Relationship | |
| Subset of | Dominant strategy equilibrium |
| Superset of | Nash equilibrium |
| Significance | |
| Proposed by | D. Bernheim and D. Pearce |
| Example | Matching pennies |
Rationalizability is a solution concept in game theory. It is the most permissive possible solution concept that still requires both players to be at least somewhat rational and know the other players are also somewhat rational, i.e. that they do not play dominated strategies. A strategy is rationalizable if there exists some possible set of beliefs both players could have about each other's actions, that would still result in the strategy being played.
Rationalizability is a broader concept than a Nash equilibrium. Both require players to respond optimally to some belief about their opponents' actions, but Nash equilibrium requires these beliefs to be correct, while rationalizability does not. Rationalizability was first defined, independently, by Bernheim (1984) and Pearce (1984).