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Drama theory differs from game theory in that it does not regard actors' preferences and perceived opportunities as fixed, but as capable of being changed by the actors themselves under the pressure of pre-play negotiations. Thus characters in a drama undergo change and development. A manyperson, multiphase theory of dramatic transformation is presented, showing how the core of a drama (in the sense of game theory) is transformed by the interaction between the characters into a strict, strong equilibrium to which they all aspire. The process of dramatic transformation is shown to be driven by actors' reactions to various "paradoxes of rationality"; it is proved that when all these paradoxes have been overcome, a full dramatic resolution has been reached, satisfying actors' emotional and moral demands, as well as the demands of rationality.

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