Boundedly rational versus optimization-based models of strategic thinking and learning in games

The paper is a comment on the article by R. Harstad and R. Selten and considers the tradeoff between bounded rationality and optimization models in the game-theoretic context. The author shows that in most of the models elements of opimization are still retained and that it is thus more productive to further improve the optimization-based modeling rather than to abandon them altogether in favour of bounded rationality

Stable schedule matching under revealed preference

Baiou and Balinski (Math. Oper. Res., 27 (2002) 485) studied schedule matching where one determines the partnerships that form and how much time they spend together, under the assumption that each agent has a ranking on all potential partners. Here we study schedule matching under more general preferences that extend the substitutable preferences in Roth (Econometrica 52 (1984) 47) by an extension of the revealed preference approach in Alkan (Econom. Theory 19 (2002) 737). We give a generalization of the GaleShapley algorithm and show that some familiar properties of ordinary stable matchings continue to hold. Our main result is that, when preferences satisfy an additional property called size monotonicity, stable matchings are a lattice under the joint preferences of all agents on each side and have other interesting structural properties

Group Strategyproof Pareto-Stable Marriage with Indifferences via the Generalized Assignment Game

We study the variant of the stable marriage problem in which the preferences of the agents are allowed to include indifferences. We present a mechanism for producing Pareto-stable matchings in stable marriage markets with indifferences that is group strategyproof for one side of the market. Our key technique involves modeling the stable marriage market as a generalized assignment game. We also show that our mechanism can be implemented efficiently. These results can be extended to the college admissions problem with indifferences

Occasional errors can benefit coordination

The chances solving a problem that involves coordination between people are increased by introducing robotic players that sometimes make mistakes. This finding has implications for real-world coordination problems

Cyclic game dynamics driven by iterated reasoning

Recent theories from complexity science argue that complex dynamics are ubiquitous in social and economic systems. These claims emerge from the analysis of individually simple agents whose collective behavior is surprisingly complicated. However, economists have argued that iterated reasoning--what you think I think you think--will suppress complex dynamics by stabilizing or accelerating convergence to Nash equilibrium. We report stable and efficient periodic behavior in human groups playing the Mod Game, a multi-player game similar to Rock-Paper-Scissors. The game rewards subjects for thinking exactly one step ahead of others in their group. Groups that play this game exhibit cycles that are inconsistent with any fixed-point solution concept. These cycles are driven by a "hopping" behavior that is consistent with other accounts of iterated reasoning: agents are constrained to about two steps of iterated reasoning and learn an additional one-half step with each session. If higher-order reasoning can be complicit in complex emergent dynamics, then cyclic and chaotic patterns may be endogenous features of real-world social and economic systems.Comment: 8 pages, 4 figures, and supplementary informatio

Optimistic irrationality and overbidding in private value auctions

Bidding one’s value in a second-price, private-value auction is a weakly dominant solution (Vickrey in J Finance 16(1):8–37, 1961), but repeated experimental studies find more overbidding than underbidding. We propose a model of optimistically irrational bidders who understand that there are possible gains and losses associated with higher bids but who may overestimate the additional probability of winning and/or underestimate the potential losses when bidding above value. These bidders may fail to discover the dominant strategy—despite the fact that the dominant strategy only requires rationality from bidders—but respond in a common sense way to out-of-equilibrium outcomes. By varying the monetary consequences of losing money in experimental auctions we observe more overbidding when the cost to losing money is low, and less overbidding when the cost is high. Our findings lend themselves to models in which less than fully rational bidders respond systematically to out-of-equilibrium incentives, and we find that our model better fits the effects of our manipulations than most of the existing models we consider

Full Agreement and the Provision of Threshold Public Goods

The experimental evidence suggests that groups are inefficient at providing threshold public goods. This inefficiency appears to reflect an inability to coordinate over how to distribute the cost of providing the good. So, why do groups not just split the cost equally? We offer an answer to this question by demonstrating that in a standard threshold public good game there is no collectively rational recommendation. We also demonstrate that if full agreement is required in order to provide the public good then there is a collectively rational recommendation, namely, to split the cost equally. Requiring full agreement may, therefore, increase efficiency in providing threshold public goods. We test this hypothesis experimentally and find support for it

Motor coordination: when two have to act as one

Trying to pass someone walking toward you in a narrow corridor is a familiar example of a two-person motor game that requires coordination. In this study, we investigate coordination in sensorimotor tasks that correspond to classic coordination games with multiple Nash equilibria, such as “choosing sides,” “stag hunt,” “chicken,” and “battle of sexes”. In these tasks, subjects made reaching movements reflecting their continuously evolving “decisions” while they received a continuous payoff in the form of a resistive force counteracting their movements. Successful coordination required two subjects to “choose” the same Nash equilibrium in this force-payoff landscape within a single reach. We found that on the majority of trials coordination was achieved. Compared to the proportion of trials in which miscoordination occurred, successful coordination was characterized by several distinct features: an increased mutual information between the players’ movement endpoints, an increased joint entropy during the movements, and by differences in the timing of the players’ responses. Moreover, we found that the probability of successful coordination depends on the players’ initial distance from the Nash equilibria. Our results suggest that two-person coordination arises naturally in motor interactions and is facilitated by favorable initial positions, stereotypical motor pattern, and differences in response times

State dependent choice

We propose a theory of choices that are influenced by the psychological state of the agent. The central hypothesis is that the psychological state controls the urgency of the attributes sought by the decision maker in the available alternatives. While state dependent choice is less restricted than rational choice, our model does have empirical content, expressed by simple "revealed preference" type of constraints on observable choice data. We demonstrate the applicability of simple versions of the framework to economic contexts. We show in particular that it can explain widely researched anomalies in the labour supply of taxi drivers

Behavioral aspects of communication in organizations

International audienc