Reference dependence, cooperation, and coordination in games
Journal Title: Judgment and Decision Making - Year 2015, Vol 10, Issue 2
Abstract
The problems of how self-interested players can cooperate despite incentives to defect, and how players can coordinate despite the presence of multiple equilibria, are among the oldest and most fundamental in game theory. In this report, we demonstrate that a plausible and even natural specification of the reference outcome in a game simultaneously predicts systematic cooperation and defection in the Prisoner’s Dilemma, as well as equilibrium selection and out-of-equilibrium play in coordination games. The predictions hold even if players are purely self-interested, there are no salient labels, the game is played only once, and there is no communication of any kind. Furthermore, the predictions are unique, as opposed to the multiplicity of equilibria in the infinitely repeated Prisoner’s Dilemma and in coordination games. We apply experimental results to test the predictions of the model.
Authors and Affiliations
Mark Schneider and Jonathan W. Leland
Keywords
Related Articles
- EP ID EP678165
- DOI -
- Views 123
- Downloads 0
Cognitive determinants of affective forecasting errors
Often to the detriment of human decision making, people are prone to an impact bias when making affective forecasts, overestimating the emotional consequences of future events. The cognitive processes underlying the impa...
Herbert Simon’s spell on judgment and decision making
How many judgment and decision making (JDM) researchers have not claimed to be building on Herbert Simon’s work? We identify two of Simon’s goals for JDM research: He sought to understand people’s decision processes—the...
Web-conferencing as a viable method for group decision research
Studying group decision-making is challenging for multiple reasons. An important logistic difficulty is studying a sufficiently large number of groups, each with multiple participants. Assembling groups online could make...
Cultivating credibility with probability words and numbers
Recent research suggests that communicating probabilities numerically rather than verbally benefits forecasters’ credibility. In two experiments, we tested the reproducibility of this communication-format effect. The eff...
Context effects in games: Local versus global sequential effects on choice in the prisoner's dilemma game
We report an experiment exploring sequential context effects on strategy choices in one-shot Prisoner's Dilemma (PD) game. Rapoport and Chammah (1965) have shown that some PDs are cooperative and lead to high cooperation...