L16

Question 1

What is behavioural game theory?

Answer 1

When choices aren’t always rational tf not always leading to optimal maximizing payoff choice
(primarily descriptive work using methods of game theory, experimental economics and experimental psychology)

Question 2

Explain how risk attitudes may affect game theory?

Answer 2

Under PSNE, ranking of payoffs is same regardless of utility function shape tf can assume it is linear

BUT under MSNE, players risk attitudes play a role in determining equilibrium (eg. prob. weighting)

Question 3

What is level-k thinking/cognitive hierarchy theory(CHT)?

Answer 3

• Theory designed to predict behaviour in one shot games and provide initial conditions for models for learning (model uses iterative step-by-step procedure)
• CHT assumes players in strategic games base decisions on predictions about likely actions by other players. It characterizes players wrt the ‘depth’ of their strategic thinking - ‘bounded rationality’

Question 4

In CHT, what is a level zero player?

Answer 4

One with non strategic moves, doesn’t consider what other players may do (eg. just chooses a strategy rule such as maximax)

Question 5

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Answer 5

A slightly more sophisticated (level one) player believes that the other players will act non-strategically meaning the other players are level zero; his or her action will be the best response consistent with this belief. An even more sophisticated (level two) player acts on the belief that the other players are level one. This pattern continues for higher-level players, but each player has only a finite depth of reasoning, meaning that individual players have a limit to the depth to which they can reason strategically.

Question 6

What does CHT imply?

Answer 6

That each player believes they are the most sophisticated player in the room.

Question 7

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Answer 7

Rest of lecture 16 on: team reasoning, social cooperation and communication