Payoff levels, loss avoidance, and equilibrium selection in the Stag Hunt: an experimental study

Game theorists typically assume that changing a game’s payoff levels—by adding the same constant to, or subtracting it from, all payoffs—should not affect behavior. While this invariance is an implication of the theory when payoffs mirror expected utilities, it is an empirical question when the “payoffs” are actually money amounts. In particular, if individuals treat monetary gains and losses differently, then payoff–level changes may matter when they result in positive payoffs becoming negative, or vice versa. We report the results of a human–subjects experiment designed to test for two types of loss avoidance: certain–loss avoidance (avoiding a strategy leading to a sure loss, in favor of an alternative that might lead to a gain) and possible–loss avoidance (avoiding a strategy leading to a possible loss, in favor of an alternative that leads to a sure gain). Subjects in the experiment play three versions of Stag Hunt, which are identical up to the level of payoffs, under a variety of treatments. We find differences in behavior across the three versions of Stag Hunt; these differences are hard to detect in the first round of play, but grow over time. When significant, the differences we find are in the direction predicted by certain– and possible–loss avoidance. Our results carry implications for games with multiple equilibria, and for theories that attempt to select among equilibria in such games

Inference within Knowledge

This paper applies the the technique of Game Logic GL! , which has recently been formulated by Kaneko and Nagashima, to Mccarthy's Three Wise Men Puzzle. The analysis makes it clear what one really knows when he or she knows it impossible to know something as well as how one can enrich his or her knowledge by knowing that someone else knows it impossible to know something. The point is that human being is capable of jumping out from the logical system within which he or she makes inferences; this may well have significant implications for the analysis of human behaviour. 1 Introduction There have been interests in formal treatment of games which involve the notion of knowledge. A first comprehensive treatment of logical systems with knowledge operator is seen in [?]. Another epochmaking achievement is seen in [?] and [?], in which the authors formulate the notion of common knowledge as an infinite conjunction of all possible states of knowledge of finite number of players, an..