Cooperation, psychological game theory, and limitations of rationality in social interaction

Abstract

In psychology, the picture is admittedly more complex. Since the publication of Freud's earliest metapsychological writings, and in particular his adumbration of the distinction between two principles of mental functioning, the BEHAVIORAL AND BRAIN SCIENCES (2003) 26, 139-198 Abstract: Rational choice theory enjoys unprecedented popularity and influence in the behavioral and social sciences, but it generates intractable problems when applied to socially interactive decisions. In individual decisions, instrumental rationality is defined in terms of expected utility maximization. This becomes problematic in interactive decisions, when individuals have only partial control over the outcomes, because expected utility maximization is undefined in the absence of assumptions about how the other participants will behave. Game theory therefore incorporates not only rationality but also common knowledge assumptions, enabling players to anticipate their co-players' strategies. Under these assumptions, disparate anomalies emerge. Instrumental rationality, conventionally interpreted, fails to explain intuitively obvious features of human interaction, yields predictions starkly at variance with experimental findings, and breaks down completely in certain cases. In particular, focal point selection in pure coordination games is inexplicable, though it is easily achieved in practice; the intuitively compelling payoff-dominance principle lacks rational justification; rationality in social dilemmas is self-defeating; a key solution concept for cooperative coalition games is frequently inapplicable; and rational choice in certain sequential games generates contradictions. In experiments, human players behave more cooperatively and receive higher payoffs than strict rationality would permit. Orthodox conceptions of rationality are evidently internally deficient and inadequate for explaining human interaction. Psychological game theory, based on nonstandard assumptions, is required to solve these problems, and some suggestions along these lines have already been put forward.Keywords: backward induction; Centipede game; common knowledge; cooperation; epistemic reasoning; game theory; payoff dominance; pure coordination game; rational choice theory; social dilemma Andrew M. Colman is Professor of Psychology at the University of Leicester, UK. He received his Ph.D. from Rhodes University in South Africa, and he taught at Cape Town and Rhodes Universities before emigrating to England in 1970. His publications include more than 120 articles and chapters, on cooperative reasoning in games and other topics, and several books, the most relevant of which are Game Theory and its Applications in the Social and Biological Sciences (2nd edn, 1995) and an edited volume entitled Cooperation and Competition in Humans and Animals (1982). His latest book is the Oxford Dictionary of Psychology (2001). Were such things here as we do speak about? Or have we eaten on the insane root That takes the reason prisoner?- Macbeth (I.iii.84) reality prin...

The psychology of coordination and common knowledge.

“…The decision to work together is as a social gamble where one can bet a certain payout to win an additional increment of profit. The risk-seeking hypothesis predicts 3 This is related to the concept of superrationality, in which rational actors decide to cooperate in a Prisoner's Dilemma because they each assume that both they and their partner rationally see the wisdom of mutual cooperation, and know that the other sees it, knows that the other knows that they know that the other sees it, and so on (see Colman, 2003;Fischer, 2009;Hofstadter, 1985). The same logic can be applied to coordination games with symmetrical payoff structures.…”

Why cooperate?An economic perspective is not enough

“…In practice, this was translated into experiments in which two or more subjects behave alone when cooperating. These include the popular game-theoretical models of "social dilemmas" such as the well-known Prisoner's Dilemma or PD (Clements and Stephens, 1995;Colman, 2003;Dugatkin, 1997;Rapoport and Chammah, 1965). A game is reduced to a choice between options identified as "cooperation" and "non-cooperation" (or "defection") that are represented entirely by different outcomes.…”

“…Moreover, using what Colman (2003) characterized as "the bedrock of methodological individualism," anonymous individuals are asked to express their preference while physically isolated in separate compartments that minimize or totally eliminate social interaction both when behaving and when receiving reinforcements. This approach has been used with both animals (e.g., Baker and Rachlin, 2002b;Clements and Stephens, 1995;Flood et al, 1983;Green et al, 1995) and humans (e.g., Baker and Rachlin, 2002a;Colman, 2003;Fehr and Gachter, 2002;Fehr and Rockenbach, 2003;Rapoport and Chammah, 1965). In some models, the opponent is not even a live subject but a computer (e.g., Baker and Rachlin, 2002a).…”

Rationality in Context: An Analogical Perspective

“…In a short reply to Colman's article "Cooperation, psychological game theory, and limitations of rationality in social interaction" [20], Kokinov challenges traditional views on rationality [21]. Taking an initial stance similar to Colman's, agreeing on that rationality fails as both, descriptive theory of human-decision making and normative theory for good decision-making, Kokinov reaches a different, more radical conclusion than Colman did before.…”