Game Theory
Analysis of interactions between rational agents
- > each have two or more strategies available
- assumes people gravitate towards rational solutions as they gain experience
Behavioral Game Theory
Study of how people actually behave in interactive situations
Trust Game
Someone gets 10$, gives a certain amount to trustee, whose money gets multiplied
-> observed how much money is invested (given) and how much money is given back
Outcomes of Trust Game
Western: gave half, got 95% of invested amount back
Kenya: investment lower, return also much less than initial investment (50%)
-> possible reason: more insecure economy
Ultimatum Game
Two participants bargain over amount of money (e.g. 10$)
- > proposer has to offer some proportion of money to responder
- > if responder accepts offer: they get to keep it, proposer keeps rest
- > if responder rejects offer, neither party gets to keep money
Outcomes of Ultimatum Game
Prediction of analytical game theory: responder accepts any amount, minimum amount proposed
- > actual results: median offers: 40-50% of money
mean: 30-40% - > offers of 40-50% accepted, below 20% rejected half of time
Prisoner’s Dilemma
Game situation:
- two people arrested, can’t communicate,
- no one confesses: both get less than 1 year
- one snitches: no prison, but the other 10
- both snitch: both get 5
Nash Equilibrium
Combination of strategies where it makes no sense for one player to deviate from his strategy
-> e.g. joint defection in prisoner’s dilemma
Public Goods Game
Resource allocation task;
- individuals given endowment, then given option to contribute some, all, or none of it to a pool of resources
- > after round: whats in pool of resources increased
- collectively rational: contribute
- individually rational: withhold contributions
Guessing Game
Pick number assumed to be average from what all participants would choose from 0-100, then half of that
- > expectations chosen, then taking half of it
- > level k-thinking
Tit for tat
Cooperation strategy:
starting off with cooperation, then always copying the others moves
Tit for two tat
Cooperation strategy;
starting off with cooperation, the copying others moves but always forgiving once
Tit for tat +1
Cooperation strategy;
starting off with cooperation, forgiving the first time you are defected, after that always copying what the other did
Values affecting behavior in social dilemma:
Social value orientation: -prosocial -individualist -competitors Counterfactual thinking
Prosocial value orientation
Want to maximize joint gain and equality in outcomes
-associated with secure attachment style and more siblings
Individualist value orientation
Interested only in maximizing own gains
Competitors
Want to maximize relative gain
-> difference between own’s and other’s outcome
Upward counterfactual thinking
“it could have been better”
- > more cooperative behavior in second half of game
- > mostly by prosocial people, least by competitive people
Downward counterfactual thinking
“it could have been worse”
-> associated with more defective behavior in second half
Social dilemma values acquisition
Often learned; e.g. economic majors more likely to free-ride, astonomy class showed greater honesty
Trust
Willingness to accept vulnerability based on positive expectations about another’s behavior
- > cooperation possibly increased when trust is increased
- > trust more likely with good reputation
Generosity
Breaking down of cooperation by noise can be avoided with generosity
Noise
Erroneous responses in game
e. g. defecting by accident
- > can lead to never-ending cycle of retaliaiton
Communication
Can eliminate detrimental effects of noise on cooperation
- > with communication as much trust from low trusters as high trusters after noise
- > better communication: better cooperation
