Note—Modeling Semirational Competitive Behavior

Management Science recently printed an exchange of views between Kadane and Larkey (Kadane, J. B., P. D. Larkey. 1982. Subjective probability and the theory of games. Management Sci.28 113–120; Kadane, J. B., P. D. Larkey. 1982. Reply to Professor Harsanyi. Management Sci.28 124.) and Harsanyi (Harsanyi, J. C. 1982. Subjective probability and the theory of games: comments on Kadane and Larkey's paper. Management Sci.28 120–124; Harsanyi, J. C. 1982. Rejoinder to Professors Kadane and Larkey. Management Sci.28 124–125.) on the relative usefulness of game theory and decision theory for analyzing decisions in competitive situations. This note comments on some of the arguments used in that exchange with particular emphasis on bidding theory. It then proposes the development of models in which both rational analysis of a model of the competitive situation as well as other factors influence the competitors. Two such models are described.