Subjunctive conditionals and revealed preference

Subjunctive conditionals are fundamental to rational decision both in singl e agent and multiple agent decision problems. They need explicit analysis o nly when they cause problems, as they do in recent discussions of rationali ty in extensive form games. This paper examines subjunctive conditionals in the theory of games using a strict revealed preference interpretation of u tility. Two very different models of games are investigated, the classical model and the limits of reality model. In the classical model the logic of backward induction is valid, but it does not use subjunctive conditionals; the relevant subjunctive conditionals do not even make sense. In the limits of reality model the subjunctive conditionals do make sense but backward i nduction is valid only under special assumptions.