Homo Economicus: The Game Theory

Homo economicus or the economic man can be referred to the concept of many theories of economics. It portrays human beings as self-interested and rational agents, who pursue optimally the subjectively defined ends. Homo economicus maximizes the utility as the customer and profitability as the producer. The whole theory is compared to the different concepts of economic behavior, cognitive biases as well as homo reciprocans. In the game theory, the homo economicus is related and associated with the assumptions of perfect rationality (Benería et al.). This essay throws light on the ways that institutional economics challenges the neoclassical assumptions about homo economicus. It gives a brief explanation regarding the economic relationship between …show more content…
Defective demand rises, at times, when any individual sellers and buyers can influence the production as well as prices. Moreover, when the perfect information is unknown to the market actors, such situation arises. In addition to this, when too fewer sellers control many markets, or when the prices fail to adjust the material changes in the market conditions. Majority of the economic debates originates from all these instances. For instance; when too much of stuff are on sale, and the demand is less, sellers experience recession as the price levels decline …show more content…
All these discussions must be embraced, to engage in the practical praxis revolving the issues of assets distribution. The development of the critical economics is based on the institutional theory of economics, to provide with ultimate supplant and confrontation of the neoclassical economic paradigm, as being the economic instrument or tool of the critical theorists. The basis of the institutional political economy is the evolutionary analysis of institutions mediating exchange, production, and distribution in the society (Pouncy, Charles). The neoclassical paradigm has, however, limited the ability to address the racism issues because of the analytical focus in the methodological individualism. The methodological individualism assumes an individual is an appropriate unit for the examination and analysis. Moreover, the neoclassical paradigm also understands the economic behavior by summing up the individuals’ activities. The social activities are understood by referencing the economic rationality as well as individual motivation and encouragement (Schneider and Dominik). As per the neoclassical theory, the main focus upon the individuals as well as their processes, the issues which involve