Game theory and social cognition

Game theory is best understood as systematized strategy. In its most basic form, it analyzes strategic choices in circumstances of interdependence where a player’s payoff entirely depends on choices made by others in the game. It was first fully developed and expressed in mathematical terms by John von Neumann and Oskar Morgenstern in The Theory of Games and Economic Behaviour published in 1944.[1] As the title implies, Game Theory was primarily used to determine outcomes of economic behaviour. Indeed, market interaction closely resembles the kind of strategic interdependence analyzed by Game Theory. Special assumptions governing economic theory were, therefore, transposed onto Game Theory. Primary among these was the assumption of rationality. Individuals were said to behave rationally, in a self-interested manner. This means that, given a set of preferences, an individual would act in such a way as to maximize those preferences. There is certain elegance in the model defined this way, as it is unnecessary to make claims about what individual preferences may be.[2] They may, therefore, range over any number of areas, from commodities markets, to aesthetics, to any other field where preferences could be prioritized. This makes Game Theory widely applicable in any number of social sciences where it could help explain strategic human choices in goal-oriented behaviour.

In particular, game theory can provide new insights into folk-psychology. Sharp deviations from predicted outcomes were observed when Game Theory was put to experimental tests. In experiments where a pool of money was collected from a group of individuals, multiplied and then redistributed equally among the group, this deviation was most apparent. Members of the group were willing to give up some of their redistributed earnings to punish individuals who contributed least or not at all to the overall pool.[3] This defies economic rationality as they are, in effect, giving up something for nothing. Punishment of so-called defectors in no way contributed to their earnings since it took place after the redistribution.  Although results from public goods experiments and ultimatum game experiments may defy economic rationality, they are deeply revealing of our everyday interactions. In social interactions, for instance, we take into account what others value and desire as well as what they think. This demonstrates that folk-psychology – our understanding of others’ mental states – can be seen as much more than a simple rationality calculator. In fact, experimental game theory reveals human interaction to be multi-faceted and influenced heavily by such non-rational considerations as morals, social norms, and emotions. Game Theory, therefore, is an important tool in discovering the processes underlying social cognition. Experiments have not only challenged classical assumptions, but also provided important insights into certain types of human social interaction.

References

[1] Hargreaves, S. And Y. Varoufakis. Game Theory. 2nd ed. New York: Routledge Taylor & Francis Group, 2004. pp 3.

[2] Hargreaves, S. And Y. Varoufakis. Game Theory. 2nd ed. New York: Routledge Taylor & Francis Group, 2004. pp 7.

[3] Fehr, E. and U. Fischbacher. “Social Norms and Human Cooperation”. Trends in Cognitive Sciences 8:4(2004).

- Eddie Garchteine, University of Toronto