Game Theory and Human Behavior
God is crafty, but He is not malicious.
My motive for doing what I am going to do is simply personal re
venge. I do not expect to accomplish anything by it.
Theodore Kaczynski (the Unabomber)
Game theory is multiplayer decision theory where the choices of each player affect the payoffs to other players, and the players take this into account in their choice behavior. In this chapter we address the contribution of game theory to the design of experiments aimed at understanding the behavior of individuals engaged in strategic interaction. We call this behavioral game theory.
Game theory is a general lexicon that applies to all life forms. Strategic interaction neatly separates living from nonliving entities and defines life itself. Strategic interaction is the sole concept commonly used in the analysis of living systems that has no counterpart in physics or chemistry.
Game theory provides the conceptual and procedural tools for studying social interaction, including the characteristics of the players, the rules of the game, the informational structure, and the payoffs associated with particular strategic interactions. The various behavioral disciplines (economics, psychology, sociology, politics, anthropology, and biology) are currently based on distinct principles and rely on distinct types of data. However, game theory fosters a unified analytical framework available to all the behavioral disciplines. This facilitates cross-disciplinary information exchange that may eventually culminate in a degree of unity within the behavioral sciences now enjoyed only by the natural sciences (see chapter 12). Moreover, because behavioral game-theoretic predictions can be systematically tested, the results can be replicated by different laboratories (Plott 1979; Smith 1982; Sally 1995). This turns social science into true science.
Behavioral game theory presumes the BPC model, as developed in §1.1. Experiments subject individuals to a variety of game settings, including diverse payoffs, informational conditions, and constraints on action, and