On the Rationality of Escalation

Escalation is a typical feature of infinite games. Therefore tools conceived for studying infinite mathematical structures, namely those deriving from coinduction are essential. Here we use coinduction, or backward coinduction (to show its connection with the same concept for finite games) to study carefully and formally the infinite games especially those called dollar auctions, which are considered as the paradigm of escalation. Unlike what is commonly admitted, we show that, provided one assumes that the other agent will always stop, bidding is rational, because it results in a subgame perfect equilibrium. We show that this is not the only rational strategy profile (the only subgame perfect equilibrium). Indeed if an agent stops and will stop at every step, we claim that he is rational as well, if one admits that his opponent will never stop, because this corresponds to a subgame perfect equilibrium. Amazingly, in the infinite dollar auction game, the behavior in which both agents stop at each step is not a Nash equilibrium, hence is not a subgame perfect equilibrium, hence is not rational.Comment: 19 p. This paper is a duplicate of arXiv:1004.525

Intelligent escalation and the principle of relativity

Escalation is the fact that in a game (for instance in an auction), the agents play forever. The $0,1$-game is an extremely simple infinite game with intelligent agents in which escalation arises. It shows at the light of research on cognitive psychology the difference between intelligence (algorithmic mind) and rationality (algorithmic and reflective mind) in decision processes. It also shows that depending on the point of view (inside or outside) the rationality of the agent may change which is proposed to be called the principle of relativity.Comment: arXiv admin note: substantial text overlap with arXiv:1306.228

The risk of divergence

We present infinite extensive strategy profiles with perfect information and we show that replacing finite by infinite changes the notions and the reasoning tools. The presentation uses a formalism recently developed by logicians and computer science theoreticians, called coinduction. This builds a bridge between economic game theory and the most recent advance in theoretical computer science and logic. The key result is that rational agents may have strategy leading to divergence .Comment: 3rd International Workshop on Strategic Reasoning, Dec 2015, Oxford, United Kingdom. 201

Rationality, Autonomy and Coordination: the Sunk Costs Perspective

Our thesis is that an agent1 is autonomous only if he is capable, within a non predictable environment, to balance two forms of rationality: one that, given goals and preferences, enables him to select the best course of action (means-ends), the other, given current achievements and capabilities, enables him to adapt preferences and future goals. We will propose the basic elements of an economic model that should explain how and why this balance is achieved: in particular we underline that an agent’s capabilities can often be considered as partially sunk investments. This leads an agent, while choosing, to consider not just the value generated by the achievement of a goal, but also the lost value generated by the non use of existing capabilities.We will propose that, under particular conditions, an agent, in order to be rational, could be led to perform a rationalization process of justification that changes preferences and goals according to his current state and available capabilities. Moreover, we propose that such a behaviour could offer a new perspective on the notion of autonomy and on the social process of coordination

Computable Rationality, NUTS, and the Nuclear Leviathan

This paper explores how the Leviathan that projects power through nuclear arms exercises a unique nuclearized sovereignty. In the case of nuclear superpowers, this sovereignty extends to wielding the power to destroy human civilization as we know it across the globe. Nuclearized sovereignty depends on a hybrid form of power encompassing human decision-makers in a hierarchical chain of command, and all of the technical and computerized functions necessary to maintain command and control at every moment of the sovereign's existence: this sovereign power cannot sleep. This article analyzes how the form of rationality that informs this hybrid exercise of power historically developed to be computable. By definition, computable rationality must be able to function without any intelligible grasp of the context or the comprehensive significance of decision-making outcomes. Thus, maintaining nuclearized sovereignty necessarily must be able to execute momentous life and death decisions without the type of sentience we usually associate with ethical individual and collective decisions

The decision-making entrepreneur; Literature review

This study provides a literature overview of the entrepreneurial decision-making process. The literature review is used as background information for a qualitative study, which investigates, by means of case studies, the decision-making process of small business enterpreneurs in The Netherlands (Gibcus and Van Hoesel, 2003). The literature overview is the starting point of a confrontation between the literature on decision-making and the empirical findings of the latter qualitive study. Firstly, this literature review gives an introduction to general decision theory. It discusses the classical rationality, the bounded rationality and the neoclassical rationality. The place of the entrepreneur in the general decision theory is also discussed. Next, an analytic framework of the strategic decision-making in SMEs is presented. The analytic framework consists of three elements: the entrepreneur, the environment and the strategic decision process. Each of these elements is critical. Finally, some earlier empirical findings on entrepreneurial strategic decision-making are discussed.

Learning to Trust

Trust is full of puzzle and paradox.Trust is both rational and emotional. Trust can go beyond calculative self-interest, but has its limits.People may want to trust, while they may also feel threatened by it.If trust is not in place prior to a relationship, on the basis of institutions, prior experience, or reputation, it has to be built up, in specific relations.For that one needs to learn, in the sense of building empathy, and perhaps a certain degree of identification.In an attempt at a better understanding of the puzzles and processes of trust, this chapter applies the perspective of 'embodied cognition', and insights from mental 'framing' and decision heuristics from social psychology.learning;trust;institutions

Abnormal attentions towards the British Royal Family. Factors associated with approach and escalation

Abnormal approach and escalation from communication to physical intrusion are central concerns in managing risk to prominent people. This study was a retrospective analysis of police files of those who have shown abnormal attentions toward the British Royal Family. Approach (n = 222), compared with communication only (n = 53), was significantly associated with specific factors, most notably serious mental illness and grandiosity. In a sample of those who engaged in abnormal communication (n = 132), those who approached (n = 79) were significantly more likely to evidence mental illness and grandiosity, to use multiple communications, to employ multiple means of communication, and to be driven by motivations that concerned a personal entitlement to the prominent individual. Logistic regression produced a model comprising grandiosity, multiple communications, and multiple means of communication, for which receiver operating characteristic (ROC) analysis gave an area under the curve (AUC) of 0.82. The implications of these findings are discussed in relation to those for other target groups

Schelling, von Neumann, and the Event that Didn’t Occur

Thomas Schelling was recognized by the Nobel Prize committee as a pioneer in the application of game theory and rational choice analysis to problems of politics and international relations. However, although he makes frequent references in his writings to this approach, his main explorations and insights depend upon and require acknowledgment of its limitations. One of his principal concerns was how a country could engage in successful deterrence. If the behavioral assumptions that commonly underpin game theory are taken seriously and applied consistently, however, nuclear adversaries are almost certain to engage in devastating conflict, as John von Neumann forcefully asserted. The history of the last half century falsified von Neumann’s prediction, and the “event that didn’t occur” formed the subject of Schelling’s Nobel lecture. The answer to the question “why?” is the central concern of this paper