Behavioral Game Theory Research Articles

A Putative Human Pheromone, Androstadienone, Increases Cooperation between Men

Androstadienone, a component of male sweat, has been suggested to function as a human pheromone, an airborne chemical signal causing specific responses in conspecifics. In earlier studies androstadienone has been reported to increase attraction, affect subjects' mood, cortisol levels and activate brain areas linked to social cognition, among other effects. However, the existing psychological evidence is still relatively scarce, especially regarding androstadienone's effects on male behaviour. The purpose of this study was to look for possible behavioural effects in male subjects by combining two previously distinct branches of research: human pheromone research and behavioural game theory of experimental economics. Forty male subjects participated in a mixed-model, double-blind, placebo-controlled experiment. The participants were exposed to either androstadienone or a control stimulus, and participated in ultimatum and dictator games, decision making tasks commonly used to measure cooperation and generosity quantitatively. Furthermore, we measured participants' salivary cortisol and testosterone levels during the experiment. Salivary testosterone levels were found to positively correlate with cooperative behaviour. After controlling for the effects of participants' baseline testosterone levels, androstadienone was found to increase cooperative behaviour in the decision making tasks. To our knowledge, this is the first study to show that androstadienone directly affects behaviour in human males.

Dynamic decision-making in uncertain environments II. Allais paradox in human behavior

In both animal and human behavioral repertoires, classical expected utility theory is considered a fundamental element of decision making under conditions of uncertainty. This theory has been widely applied to problems of animal behavior and evolutionary game theory, as well as to human economic behavior. The Allais paradox hinges on the expression of avoidance of bankruptcy by humans, or death by starvation in animals. This paradox reveals that human behavioral patterns are often inconsistent with predictions under the classical expected utility theory as formulated by von Neumann and Morgenstern. None of the many attempts to reformulate utility theory has been entirely successful in resolving this paradox with rigorous logic. We present a simple, but novel approach to the theory of decision making, in which utility is dependent on current wealth, and in which losses are more heavily weighted than gains. Our approach resolves the Allais paradox in a manner that is consistent with how humans formulate decisions under uncertainty. Our results indicate that animals, including humans, are in principle risk-averse. Our restructuring of dynamic utility theory presents a basic optimization scheme for sequential or dynamic decisions in both animals and humans.

On experimental economics and the comparison between the last two versions of Molière's Tartuffe

Numerous papers show how game theory can improve our understanding of literature. There is no paper, however, using experimental economics to arrive at a new understanding of a play. We fill this gap by using experimental evidence to compare the last two versions of Molière's Tartuffe. In the final version of the play, there are two stag hunt games, one without pre-game communication and one with. In the first game players fail to coordinate to the efficient equilibrium but in the second one they do, which is consistent with experimental evidence. In the penultimate version of the play, there is pre-game communication in the first stag hunt game but players fail to coordinate to the efficient equilibrium, which is not consistent with experimental evidence. By removing the pre-game communication from the first game, Molière adapted his play as if he had been a student of modern behavioral game theory.

The Bubble Game: An Experimental Study of Speculation

We propose a bubble game that involves sequential trading of an asset commonly known to be valueless. Because no trader is ever sure to be last in the market sequence, the game allows for a bubble at the Nash equilibrium when there is no cap on the maximum price. We run experiments both with and without a price cap. Structural estimation of behavioral game theory models suggests that quantal responses and analogy-based expectations are important drivers of speculation.

How to Define Trust in Medical Consultation? A New Perspective With the Game Theory Approach

This study aims to describe trust in medical consultation by using the game theory approach as a frame of reference. In the field of health, game theory seems to give interesting inputs in describing how trust is maintained and reinforced. A qualitative interview was conducted in Northern Italy at the University Hospital of Milan. Explorative results indicate that, in accordance with behavioural game theory approach, trustis associated with the frequency of interactions, continuity, and positive expectations. These findings highlight the potential value of game theory approach to explain trust and to design services, which in Italy and elsewhere are increasingly focused on enhancing access, often impersonal and no-continuative, rather than maintaining trust relationships based on continuity and frequency.

Game-Based Simulation for Cross-Cultural Decision Making Training

Increasing globalization has had a major impact on manufacturing and service industries as well as on coalition operations conducted by the military. What is common to both the commercial and military sectors is the recent surge in interest in cross-cultural decision making (CCDM) training. Existing CCDM training approaches tend to employ either some form of multi-agent simulation or some variant of classical game theory. Despite their manifest benefits, these approaches have specific limitations that need to be overcome to create an effective cross-cultural training system. Multi-agent simulations typically lack theoretical underpinnings while classical game theory-based approaches take a limited view of strategic decision making. Specifically, by adopting a Western view of rationality, game-theoretic approaches fail to accommodate considerations such as fairness, altruism and reciprocity. Empirical research in strategic economic games has shown that humans respond to more than merely monetary incentives. In particular, research has shown that cultural norms play a central role in human decision making behavior, especially in non-Western cultures. This paper presents an innovative approach to game-based simulation that combines findings from behavioral game theory with classical game theory and multi-agent simulation to exploit the strengths of each approach while making learning enjoyable, memorable, and fun. An illustrative game-based simulation for CCDM training is also presented. The simulation framework is equally applicable to teaching other soft skills as well as skills that are too hazardous or too expensive to teach in the realworld through live exercises. © 2012 Wiley Periodicals, Inc.

Focus on Authors

Focus on Authors

Exploring social preferences in private–collective innovation

Firms, research institutions and individuals have long realised the advantages of innovating in an open manner. Companies such as IBM, Philips and Procter & Gamble, increasingly seek to cooperate with outside individuals and organisations to tap into their ideas for new products and services. This approach makes good business sense, but it is also difficult to achieve. In particular, mechanisms that motivate innovators to ‘open up’ are critical in achieving the benefits of open innovation. Private–collective innovation (PCI) has become an increasingly important model for explaining innovation at the boundaries of traditional, closed and open innovation regimes. Previous work has examined PCI both conceptually and empirically, and recent scholarship has focused specifically on the initiation of PCI as it relates to problems of collective action. This work shows that a project will not ‘take off’ unless the right incentives are in place for innovators to contribute their knowledge to open innovation from the beginning. Drawing on behavioural game theory, this paper expands on prior work by exploring social preferences in the initiation of PCI. The authors conducted a simulation study that shows how inequality aversion, reciprocity and fairness affect the underlying conditions that lead to the initiation of PCI. The results indicate that reciprocity and the potential gains for other participants explain changes in individual knowledge sharing in PCI.

A (eu)social Conquest of the Psychological and Cognitive Sciences?

A (eu)social Conquest of the Psychological and Cognitive Sciences?

Emotion Interference Solves Social Dilemma

Roles of emotion in decision-making have been attracting attention in neuroeconomics and behavioral game theory. We mathematically demonstrate that “emotion interference”, a recently-discovered psychological phenomenon [1] helps to solve social dilemma in a one-shot prisoner’s dilemma game. Furthermore, the present theory also accounts for the violation of Savage’s sure-thing principle in the prisoner’s dilemma [2]. Furthermore, it is also explained that why people in the society with higher social mobility are more cooperative. Relations of the present work to recently evolving fields of neuroeconomics and quantum decision theory are discussed.

Rethinking the Tragedy of the Commons: The Integration of Socio-Psychological Dispositions

In current research there is increasing evidence on why and how common-pool resources are successfully, i.e. sustainably, managed without the force of (often unsuccessful) top-level policy regulations. G. Hardin argued in 1968 in his Tragedy of the Commons (Hardin 1968) that commons must become depleted if users are free to choose extraction and resource use levels. In this study, we propose that socio-psychological factors can explain the success of resource use of a common without any top-level regulations. We exemplify this behavior by a spatio-temporally dynamic agent-based model of the Tragedy of the Commons using behavioral game theory and Nash equilibria calculation. By providing a spatio-temporal representation of Hardin's dilemma, the model could verify his argument in a temporal way if socio-psychological influence is disregarded, and indicated that under its influence the common can be sustained. We illustrated how dispositions such as cooperativeness, positive reciprocity, fairness towards others, and risk aversion broadly can support sustainable use, while negative reciprocity, fairness towards oneself, and conformity can inhibit it. Though, we also showed that it would be dangerous to generalize this kind of behavior, as changes in one of these dispositions can result in opposite system behavior, in dependence on the other dispositions. Due to this general capacity to account for such complex behavior that real common-pool system usually exhibit, and its ability to model intermediate equilibria, the proposed modelling approach, i.e. combining game-theory solution concepts with agent-based modelling, may be worth an assessment of its capacity to model empirical phenomena.

Who Thinks about the Competition? Managerial Ability and Strategic Entry in US Local Telephone Markets

We examine US local telephone markets shortly after the Telecommunications Act of 1996. The data suggest that more experienced, better-educated managers tend to enter markets with fewer competitors. This motivates a structural econometric model based on behavioral game theory that allows heterogeneity in managers' ability to conjecture competitor behavior. We find that manager characteristics are key determinants in managerial ability. This estimate of ability predicts out-of-sample success. Also, the measured level of ability rises following a shakeout, suggesting that our behavioral assumptions may be most relevant early in the industry's life cycle. (JEL L96, L98, M10)

Learning dynamics in public goods games

We extend recent analyses of stochastic effects in game dynamical learning to cases of multiplayer games and to games defined on networked structures. By means of an expansion in the noise strength we consider the weak-noise limit and present an analytical computation of spectral properties of fluctuations in multiplayer public goods games. This extends existing work on two-player games. In particular we show that coherent cycles may emerge driven by noise in the adaptation dynamics. These phenomena are not too dissimilar from cyclic strategy switching observed in experiments of behavioral game theory.

Normative theory in decision making and moral reasoning

AbstractNormative theories can be useful in developing descriptive theories, as when normative subjective expected utility theory is used to develop descriptive rational choice theory and behavioral game theory. “Ought” questions are also the essence of theories of moral reasoning, a domain of higher mental processing that could not survive without normative considerations.

The future of behavioral game theory

Behavioral economics has rejuvenated economic theory and deepened the bonds between economic theory and the other social sciences. Neoclassical economics does not depend on individual preferences being self-regarding. Moreover, in market contexts, laboratory experiments indicate that traditional theory works well. Behavioral economic findings thus enrich and expand neoclassical economics rather than undermining it. In particular, social norms are an emergent property of human sociality, and exist as macrosocial structures that are not reducible to the preferences of individuals. Behavioral economists are not theorists, but rather experimentalists. With few exceptions, they do not provide, nor aim to provide, cogent models for the phenomena they discover. Far from downplaying “inconvenient facts,” as is the practice of traditional economic theory, behavioral economists relish finding novel forms of individual decision-making and strategic behavior.

Adaptive group coordination and role differentiation.

Many real world situations (potluck dinners, academic departments, sports teams, corporate divisions, committees, seminar classes, etc.) involve actors adjusting their contributions in order to achieve a mutually satisfactory group goal, a win-win result. However, the majority of human group research has involved situations where groups perform poorly because task constraints promote either individual maximization behavior or diffusion of responsibility, and even successful tasks generally involve the propagation of one correct solution through a group. Here we introduce a group task that requires complementary actions among participants in order to reach a shared goal. Without communication, group members submit numbers in an attempt to collectively sum to a randomly selected target number. After receiving group feedback, members adjust their submitted numbers until the target number is reached. For all groups, performance improves with task experience, and group reactivity decreases over rounds. Our empirical results provide evidence for adaptive coordination in human groups, and as the coordination costs increase with group size, large groups adapt through spontaneous role differentiation and self-consistency among members. We suggest several agent-based models with different rules for agent reactions, and we show that the empirical results are best fit by a flexible, adaptive agent strategy in which agents decrease their reactions when the group feedback changes. The task offers a simple experimental platform for studying the general problem of group coordination while maximizing group returns, and we distinguish the task from several games in behavioral game theory.

Distributed Coding of Actual and Hypothetical Outcomes in the Orbital and Dorsolateral Prefrontal Cortex

Knowledge about hypothetical outcomes from unchosen actions is beneficial only when such outcomes can be correctly attributed to specific actions. Here we show that during a simulated rock-paper-scissors game, rhesus monkeys can adjust their choice behaviors according to both actual and hypothetical outcomes from their chosen and unchosen actions, respectively. In addition, neurons in both dorsolateral prefrontal cortex and orbitofrontal cortex encoded the signals related to actual and hypothetical outcomes immediately after they were revealed to the animal. Moreover, compared to the neurons in the orbitofrontal cortex, those in the dorsolateral prefrontal cortex were more likely to change their activity according to the hypothetical outcomes from specific actions. Conjunctive and parallel coding of multiple actions and their outcomes in the prefrontal cortex might enhance the efficiency of reinforcement learning and also contribute to their context-dependent memory.

Contractarian Compliance and the 'Sense of Justice': A Behavioral Conformity Model and Its Experimental Support

Abstract The social contract approach to the study if institutions aims at providing a solution to the problem of compliance with rational agreements in situations characterized by a conflict between individual rationality and social optimality. After a short discussion of some attempts to deal with this problem from a rational choice perspective, we focus on John Rawls's idea of 'sense of justice' and its application to the explanation of the stability of a well-ordered society. We show how the relevant features of Rawls's theory can be captured by a behavioral game theory model of beliefs dependent dispositions to comply, and we present the results of two experimental studies that provide support to the theory.

The Importance of Norms: Behavioural Game Theory as a Tool to Understand Neighbourhood Events

A neighbourhood’s viability depends strongly on the willingness of its residents to intervene. According to Mancur Olson’s free‐rider theorem, collective action will neither be initiated, nor sustained unless it is found profitable by every single participant. This “n‐person prisoners’ dilemma” indicates that the successful cases of cooperation, not the failures, call for an explanation; this is the theoretical starting point for a study of resident interactions in the viable Dutch mid‐rise post‐Second World War neighbourhood Buitenveldert‐Amsterdam. This article attempts to show that behavioural game theory is appropriate for the description and explanation of the reasoning and behaviour of residents who perceive collective good games. The deductive methodology known as analytic narrative is used to blend behavioural game theory and narration into the study of liveability problems. The results indicate that social norms are important as determinants of “what types of games residents play”, which in turn determines the degree of cooperative behaviour and the effectiveness of social control in a neighbourhood.

Beyond Equilibrium: Predicting Human Behavior in Normal-Form Games

It is standard in multiagent settings to assume that agents will adopt Nash equilibrium strategies. However, studies in experimental economics demonstrate that Nash equilibrium is a poor description of human players' initial behavior in normal-form games. In this paper, we consider a wide range of widely-studied models from behavioral game theory. For what we believe is the first time, we evaluate each of these models in a meta-analysis, taking as our data set large-scale and publicly-available experimental data from the literature. We then propose modifications to the best-performing model that we believe make it more suitable for practical prediction of initial play by humans in normal-form games.