Econ 119 Final Behavioral Game Theory

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behavioral game theory

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a blend of empirical observations, traditional game theory, and some new theories aimed at understanding how people think about strategic interactions, especially how they try to predict others' behavior.

study of social preferences and their implications for games

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levels of sophistication

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how do non-strategic ("irrational") players affect rational ones

how do strategic but not-perfectly-rational players think about a game

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Irrational Players Effect

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irrational players might to better than rational ones

even a few rational players, can have a large effect on equilibrium (party)

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Level K Model

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Level 0: dont think strategically, random

Level 1: assume other players are level 0, and respond optimally

Level 2: assume other players are level, and respond optimally

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Dominance Thinking

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based on iterated elimination

step 0: assume others play uniformly (like level-1 thinker)
Step 1: assume others have done one round of iterated elimination, play uniformly in remaining range
Step 2: assume others have done two rounds of iterated elimination of dominated strategies.

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Coordination Games

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situations in which all players must choose between a number of actions, and everyone benefits if everyone chooses the same action

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Hide-and-Seek Games

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Two-player games in which one party (the seeker) benefits from coordinating her action with the other player, and the other party (the hider) benefits from miscoordinating her action

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Choice Reinforcement

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strategies are reinforced by their realized payoffs; attraction to unchosen strategies doesnt change or changes mechanically

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Belief Learning

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A player updates beliefs about what others will do based on history, and increases attractions to strategies that do well given her beliefs

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Experience-Weighted Attraction

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combines features of choice reinforcement and belief learning

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Information Projection

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typical reason person acts too much as if the info she has at the moment is available in other situations or to others, even when it's clearly not

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hindsight bias

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when a person receieves a piece of info and is asked what she beleived before she knew this info or what others should have believed w/o it,
she underestimates the importance of the info in shaping beliefs

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curse of knowledge

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those who know a piece of info cant predict or understand the behavior of those who dont have the same piece of info

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common-value auction

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an auction in which the item for sale has the same value to all the bidders

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winner's curse

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common-value auctions, bidders often overbid, leading the winner to make a loss.

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Cursed Equilibrium

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Each Player correctly anticipates the distribution of play by others and maximizes utility given her cursed beliefs