Strategic Choice of Preferences: The Persona Model

Wolpert, David H.; Jamison, Jennifer R.; Harré, Michael

doi:10.2139/ssrn.1692757

Cited by 10 publications

(13 citation statements)

References 53 publications

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“…The variational principle in the negative free-energy difference generalizes previous studies in which QRE models of bounded rationality assume bounded rational players whose choice probabilities are given by the Boltzmann distribution [20][21][22][23], and whose temperature parameters can be interpreted as a strategic choice of preferences [78]. The QRE model can be obtained as a special case of the model presented here where all prior probabilities are assumed to be uniform.…”

Section: Discussionmentioning

confidence: 77%

Thermodynamics as a theory of decision-making with information-processing costs

2013

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Perfectly rational decision-makers maximize expected utility, but crucially ignore the resource costs incurred when determining optimal actions. Here, we propose a thermodynamically inspired formalization of bounded rational decision-making where information processing is modelled as state changes in thermodynamic systems that can be quantified by differences in free energy. By optimizing a free energy, bounded rational decision-makers trade off expected utility gains and information-processing costs measured by the relative entropy. As a result, the bounded rational decision-making problem can be rephrased in terms of well-known variational principles from statistical physics. In the limit when computational costs are ignored, the maximum expected utility principle is recovered. We discuss links to existing decision-making frameworks and applications to human decision-making experiments that are at odds with expected utility theory. Since most of the mathematical machinery can be borrowed from statistical physics, the main contribution is to reinterpret the formalism of thermodynamic free-energy differences in terms of bounded rational decisionmaking and to discuss its relationship to human decision-making experiments.

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Section: Discussionmentioning

confidence: 77%

Thermodynamics as a theory of decision-making with information-processing costs

2013

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“…and agent i's action a i is the cost i claims for the vase and agent −i's action a −i is the cost −i claims for the vase, the utility for agent i is [24]:…”

Section: Corollary 32mentioning

confidence: 99%

Iterated Economic Games, Logic Gates, and the Flow of Shared Information in Strategic Interactions

Harré

2017

Preprint

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Iterated games, in which the same economic interaction is repeatedly played between the same agents, are an important framework for understanding the effectiveness of strategic choices over time. To date very little work has applied information theory to the information sets used by agents in order to decide what action to take next in such strategic situations. This article looks at the mutual information between previous game states and an agent's next action by introducing two new classes of games: 'invertible games' and 'cyclical games'. By explicitly expanding out the mutual information between past states and the next action we show under what circumstances these expressions can be simplified. These information measures are then applied to the Traveler's Dilemma game and the Prisoner's Dilemma game, the Prisoner's Dilemma being invertible, to illustrate their use. In the Prisoner's Dilemma a novel connection is made between the computational principles of logic gates and both the structure of games and the agents' decision strategies. This approach is applied to the cyclical game Matching Pennies to analyse the foundations of a behavioural ambiguity between two well studied strategies: 'Tit-for-Tat' and 'Win-Stay, Lose-Switch'.

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“…With this range of parameters, the β term describes the rationality [23] or even the persona [24] of each player. In this sense it can be thought of as a psychological parameter that mediates the decision-making process between the accumulation of information regarding the game and the behavioural outcome Q x .…”

Section: −1 Xmentioning

confidence: 99%

“…The story of the game is that two criminals are picked up for the same crime and placed in two separate cells so that they cannot communicate and both suspects are offered the same deal: If you both choose to remain silent as to who committed the crime both suspects will get 1 year in jail, if one accuses the other while they in turn claim innocence, the accuser goes free and the accused receives a 3 year jail term, but if they both accuse each other of the crime they will each receive a 2 year jail term. The situation is depicted in the payoff matrices (24) where left or top = silence (Q x = −1), right or bottom = accusing the other person (Q x = +1):…”

Section: Quantal Equilibrium Paths: Prisoners' Dilemmamentioning

confidence: 99%

Strategic Islands in Economic Games: Isolating Economies From Better Outcomes

Harré

Bossomaier

2014

Entropy

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Many of the issues we face as a society are made more problematic by the rapidly changing context in which important decisions are made. For example buying a petrol powered car is most advantageous when there are many petrol pumps providing cheap petrol whereas buying an electric car is most advantageous when there are many electrical recharge points or high capacity batteries available. Such collective decision-making is often studied using economic game theory where the focus is on how individuals might reach an agreement regarding the supply and demand for the different energy types. But even if the two parties find a mutually agreeable strategy, as technology and costs change over time, for example through cheaper and more efficient batteries and a more accurate pricing of the total cost of oil consumption, so too do the incentives for the choices buyers and sellers make, the result of which can be the stranding of an industry or even a whole economy on an island of inefficient outcomes. In this article we consider the issue of how changes in the underlying incentives can move us from an optimal economy to a sub-optimal economy while at the same time making it impossible to collectively navigate our way to a better strategy without forcing us to pass through a socially undesirable "tipping point". We show that different perturbations to underlying incentives results in the creation or destruction of "strategic islands" isolated by disruptive transitions between strategies. The significant result in this work is the illustration that an economy that remains strategically stationary can over time become stranded in a suboptimal outcome from which there is no easy way to put the economy on a path to better outcomes without going through an economic tipping point.

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Strategic Choice of Preferences: The Persona Model

Cited by 10 publications

References 53 publications

Thermodynamics as a theory of decision-making with information-processing costs

Thermodynamics as a theory of decision-making with information-processing costs

Iterated Economic Games, Logic Gates, and the Flow of Shared Information in Strategic Interactions

Strategic Islands in Economic Games: Isolating Economies From Better Outcomes

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