Behavioral game theory

Behavioral game theory seeks to examine how people's strategic decision-making behavior is shaped by social preferences, social utility and other psychological factors.[1] Behavioral game theory analyzes interactive strategic decisions and behavior using the methods of game theory,[2] experimental economics, and experimental psychology. Experiments include testing deviations from typical simplifications of economic theory such as the independence axiom[3] and neglect of altruism,[4] fairness,[5] and framing effects.[1] As a research program, the subject is a development of the last three decades.[6]

Traditional game theory is a critical principle of economic theory, and assumes that people's strategic decisions are shaped by rationality, selfishness and utility maximisation.[7] It focuses on the mathematical structure of equilibria, and tends to use basic rational choice theory and utility maximization as the primary principles within economic models. At the same time rational choice theory is an ideal model that assumes that individuals will actively choose the option with the greatest benefit. The fact is that consumers have different preferences and rational choice theory is not accurate in its assumptions about consumer behavior. In contrast to traditional game theory, behavioral game theory examines how actual human behavior tends to deviate from standard predictions and models. In order to more accurately understand these deviations and determine the factors and conditions involved in strategic decision making, behavioral game theory aims to create new models that incorporate psychological principles.[8][1] Studies of behavioral game theory demonstrate that choices are not always rational and do not always represent the utility maximizing choice.[9]

Behavioral game theory largely utilizes empirical and theoretical research to understand human behavior.[1] It also uses laboratory and field experiments, as well as modeling – both theoretical and computational.[9] Recently, methods from machine learning have been applied in work at the intersection of economics, psychology, and computer science to improve both prediction and understanding of behavior in games.[10][11]

  1. ^ a b c d Camerer, Colin F (1997-11-01). "Progress in Behavioral Game Theory". Journal of Economic Perspectives. 11 (4): 167–188. doi:10.1257/jep.11.4.167. ISSN 0895-3309.
  2. ^ R. J. Aumann (2008). "game theory," The New Palgrave Dictionary of Economics, 2nd Edition. Abstract.
  3. ^ Camerer, Colin; Ho, Teck-Hua (March 1994). "Violations of the betweenness axiom and nonlinearity in probability". Journal of Risk and Uncertainty. 8 (2): 167–196. doi:10.1007/bf01065371. S2CID 121396120.
  4. ^ James Andreoni et al. (2008). "altruism in experiments," The New Palgrave Dictionary of Economics, 2nd Edition. Abstract.
  5. ^ H. Peyton Young (2008). "social norms," The New Palgrave Dictionary of Economics, 2nd Edition. Abstract.
  6. ^ • Camerer, Colin (2003). Behavioral game theory: experiments in strategic interaction. New York, New York Princeton, New Jersey: Russell Sage Foundation Princeton University Press. ISBN 9780691090399. Description Archived 2011-05-14 at the Wayback Machine, preview ([ctrl]+), and ch. 1 link.
       * _____, George Loewenstein, and Matthew Rabin, ed. (2003). Advances in Behavioral Economics, Princeton. 1986–2003 papers. Description, contents, and preview.
       * Drew Fudenberg (2006). "Advancing Beyond Advances in Behavioral Economics," Journal of Economic Literature, 44(3), pp. 694–711.
       * Vincent P. Crawford (1997). "Theory and Experiment in the Analysis of Strategic Interaction," in Advances in Economics and Econometrics: Theory and Applications, pp. 206–242. Cambridge. Reprinted in Camerer et al. (2003), Advances in Behavioral Economics, Princeton, ch. 12.
       * Martin Shubik (2002). "Game Theory and Experimental Gaming," in R. Aumann and S. Hart, ed., Handbook of Game Theory with Economic Applications, Elsevier, v. 3, pp. 2327–2351. Abstract.
       • Charles R. Plott and Vernon L. Smith, ed. (2008). Handbook of Experimental Economics Results, v. 1, Elsevier, Part 4, Games preview and ch. 45–66 preview links.
       * Games and Economic Behavior, Elsevier. Aims and scope.
  7. ^ Cite error: The named reference CN_MP-BGT-R-09 was invoked but never defined (see the help page).
  8. ^ Cite error: The named reference Gintis was invoked but never defined (see the help page).
  9. ^ a b Camerer, C. (2003). Behavioral game theory: Experiments in strategic interaction. Princeton University Press.
  10. ^ Wright, James R.; Kevin Leyton-Brown (2014). "Level-0 meta-models for predicting human behavior in games". Proceedings of the fifteenth ACM conference on Economics and computation. pp. 857–874. doi:10.1145/2600057.2602907. ISBN 9781450325653. S2CID 14162985.
  11. ^ Fudenberg, Drew; Liang, Annie (2019-12-01). "Predicting and Understanding Initial Play" (PDF). American Economic Review. 109 (12): 4112–4141. doi:10.1257/aer.20180654. ISSN 0002-8282. S2CID 213823731.