Economic theory bases on a fundamental principle that humans make rational choices.

A rational choice to my understanding, is to make a logical decision that would make you better off than your current situation.

There is a famous game – “Ultimatum Game”, which displays the irrationality of humans. There are many versions but I shall use a simplified example here to let you know the essence of the game:

Imagine you and I are playing the game.

A banker will pass you $100 and share it with me.

You can offer any amount to me, for example, $1 for me and $99 for yourself.

But I must agree to the arrangement you proposed for both of us to keep the money. If not, none of us gets to keep the money.

The rational choice for me is that I should accept anything you offer, even $0.01, because it is ...