In recent years, a number of authors have used gametheoretic reasoning to explain why purely self-interested agentswould ever conform their economic activities with the requirements of justice, when by doing so they forego opportunities to reapunilateral net gains by exploiting others. In this paper, I argue that Hume's justification of honest economic exchanges between self-interested agents in the Treatise foreshadows this contemporary literature. Hume analyzes the problem of explaining justice in self-interested economic exchange as a problem of agents coordinating on (...) a pattern of reciprocal cooperation, as opposed to some other behavioral pattern such as reciprocal exploitation, in exchanges repeated over time. Hume's arguments anticipate informally thecontemporary interpretation of just economic practices as forming part of an equilibrium of a repeated game. I close the paper by arguing that Hume does not provide a satisfactory explanation of how the mutual expectations that support justice in economic exchange arise in a community of self-interested agents. The problem Hume leaves unsolved is one of equilibrium selection, that is: Why do agents follow an equilibrium corresponding to just economic exchanges rather than some other equilibrium corresponding to unjust exchanges? I also argue that contemporary game theory still lacks a satisfactory theory of equilibrium selection, but that such a theory would lead us closer to a satisfactory Humean reconciliation of justice and self-interest in economic exchange. (shrink)

Focal points seem to be important in helping players coordinate their strategies in coordination problems. Game theory lacks, however, a formal theory of focal points. This paper proposes a theory of focal points that is based on individual rationality considerations. The two principles upon which the theory rest are the Principle of Insufficient Reason (IR) and a Principle of Individual Team Member Rationality. The way IR is modelled combines the classic notion of description symmetry and a new notion of pay-off (...) symmetry, which yields different predictions in a variety of games. The theory can explain why people do better than pure randomization in matching games. (shrink)

Payoff dominance, a criterion for choosing between equilibrium points in games, is intuitively compelling, especially in matching games and other games of common interests, but it has not been justified from standard game-theoretic rationality assumptions. A psychological explanation of it is offered in terms of a form of reasoning that we call the Stackelberg heuristic in which players assume that their strategic thinking will be anticipated by their co-player(s). Two-person games are called Stackelberg-soluble if the players' strategies that maximize against (...) their co-players' best replies intersect in a Nash equilibrium. Proofs are given that every game of common interests is Stackelberg-soluble, that a Stackelberg solution is always a payoff-dominant outcome, and that in every game with multiple Nash equilibria a Stackelberg solution is a payoff-dominant equilibrium point. It is argued that the Stackelberg heuristic may be justified by evidentialist reasoning. (shrink)

Hume is rightly credited with giving a brilliant, and perhaps the best, account of justice as convention. Hume's importance as a forerunner of modern economics has also long been recognized. However, most of Hume's readers have not fully appreciated how closely Hume's analysis of convention foreshadows a particular branch of economic theory, namely, game theory. Starting with the work of Barry, Runciman and Sen and Lewis, there has been a flowering of literature on the informal game-theoretic insights to be found (...) in classics of political philosophy such as Hobbes, Locke, Hume and Rousseau. A number of authors in this tradition, including Lewis, Gauthier, Mackie, and Postema, have identified passages in Hume which they interpret as giving informal examples of specific games. Yet, unlike his predecessors, Hobbes and Locke, Hume does much more than present examples which have a game-theoretic structure. In his account of convention, Hume gives general conditions which characterize the resolution of social interaction problems, and in the examples he uses to illustrate this account, Hume outlines several different methods by which agents can arrive at such a resolution. Hume's general account of convention and his explanations of the origins of particular conventions together constitute a theory of strategic interaction, which is precisely what game theory aspires to be. (shrink)

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. Key Words: backward induction; Centipede game; common knowledge; cooperation; epistemic reasoning; game theory; payoff dominance; pure coordination game; rational choice theory; social dilemma. (shrink)

David Lewis’ Convention has been a major source of inspiration for philosophers and social scientists alike for the analysis of norms. In this essay, I demonstrate its usefulness for the analysis of some moral norms. At the same time, conventionalism with regards to moral norms has attracted sustained criticism. I discuss three major strands of criticism and propose how these can be met. First, I discuss the criticism that Lewis conventions analyze norms in situations with no conflict of interest, whereas (...) most, if not all, moral norms deal with situations with conflicting interests. This criticism can be answered by showing that conventions can emerge in those contexts as well. Secondly, I discuss the objection that this type of conventionalism, inspired by Lewis, presents moral norms as fundamentally contingent, whereas most, if not all, moral norms are not. However, such critics fail to appreciate that conventions are not radically contingent. Moreover, if one distinguishes the question as to why an individual should comply with a norm from the question whether the norm in question itself can be justified, a core element of the complaint of contingency disappears. The third objection to conventionalism concerns the way in which conventionalists justify norms. I argue that reflection upon the way in which according to Lewis norms are justified reveals a fundamental tension in his theory. Possible solutions to this tension all have in common that the complaint of contingency returns in some form. Therefore, this third complaint cannot be avoided altogether. (shrink)

On many occasions, individuals are able to coordinate their actions. The first empirical evidence to this effect has been described by Schelling (1960) in an informal experiment. His results were corroborated many years later by Mehta et al. (1994a,b) and Bacharach and Bernasconi (1997). From the point of view of mainstream game theory, the success of individuals in coordinating their actions is something of a mystery. If there are two or more strict Nash equilibria, mainstream game theory has no means (...) of explaining why people tend to choose their part of one and the same equilibrium. Textbooks (see, e.g., Rasmusen, 1989 and Kreps, 1990) refer to the fact that players may use focal points (see Schelling (1960)) or social conventions (see Lewis (1969)). Both notions cannot easily be incorporated into mainstream game theory, however. The notion of social conventions has recently been extensively studied in the context of evolutionary game theory where a population of agents interacts with each other. The central focus of this paper, however, is on situations where a few players play a game only once and I study how they may coordinate their actions. (shrink)

This commentary focuses on the parts of psychological game theory dealing with preference, as illustrated by team reasoning, and supports the conclusion that these theoretical notions do not contribute above and beyond existing theory in understanding social interaction. In particular, psychology and games are already bridged by a comprehensive, formal, and inherently psychological theory, interdependence theory (Kelley & Thibaut 1978; Kelley et al. 2003), which has been demonstrated to account for a wide variety of social interaction phenomena.

I introduce an extension of the Lewis-Skyrms signaling game, analysed from a dynamical perspective via simple reinforcement learning. In Lewis’ (Convention, Blackwell, Oxford, 1969) conception of a signaling game, salience is offered as an explanation for how individuals may come to agree upon a linguistic convention. Skyrms (Signals: evolution, learning & information, Oxford University Press, Oxford, 2010a) offers a dynamic explanation of how signaling conventions might arise presupposing no salience whatsoever. The extension of the atomic signaling game examined here—which I (...) will refer to as a salience game—introduces a variable parameter into the atomic signaling game which allows for degrees of salience, thus filling in the continuum between Skyrms’ and Lewis’ models. The model does not presuppose any salience at the outset, but illustrates a process by which accidentally evolved salience is amplified, to the benefit of the players. It is shown that increasing degrees of salience allow populations to avoid sub-optimal pooling equilibria and to coordinate upon conventions more quickly. (shrink)

Does greater knowledge help or hinder one’s ability to coordinate with others? While individual expertise can reveal a suitable focal point to converge on, ‘blissful’ ignorance may systematically bias decisions towards it through mere recognition. Our experiment finds in favour of the former possibility. Both specific and general knowledge are significantly associated with success in four of five coordination problems as well as over all. Our analysis suggests that more knowledgeable participants are better able to identify focal decision alternatives because (...) they are aware of more such alternatives and possess more relevant information about each. (shrink)

Communication involves a great deal of uncertainty. Prima facie, it is therefore surprising that biological communication systems—from cellular to human—exhibit a high degree of ambiguity and often leave its resolution to contextual cues. This puzzle deepens once we consider that contextual information may diverge between individuals. In the following we lay out a model of ambiguous communication in iterated interactions between subjectively rational agents lacking a common contextual prior. We argue ambiguity’s justification to lie in endowing interlocutors with means to (...) flexibly adapt language use to each other and the context of their interaction to serve their communicative preferences. Linguistic alignment is shown to play an important role in this process; it foments convergence of contextual expectations and thereby leads to agreeing use and interpretation of ambiguous messages. We conclude that ambiguity is ecologically rational when interlocutors’ contextual expectations are generally in line or they interact multiple times in an informative context, enabling for the alignment of their expectations. In light of these results meaning multiplicity can be understood as an opportunistic outcome enabled and shaped by linguistic adaptation and contextual information. (shrink)

Communication involves a great deal of uncertainty. Prima facie, it is therefore surprising that biological communication systems—from cellular to human—exhibit a high degree of ambiguity and often leave its resolution to contextual cues. This puzzle deepens once we consider that contextual information may diverge between individuals. In the following we lay out a model of ambiguous communication in iterated interactions between subjectively rational agents lacking a common contextual prior. We argue ambiguity’s justification to lie in endowing interlocutors with means to (...) flexibly adapt language use to each other and the context of their interaction to serve their communicative preferences. Linguistic alignment is shown to play an important role in this process; it foments convergence of contextual expectations and thereby leads to agreeing use and interpretation of ambiguous messages. We conclude that ambiguity is ecologically rational when interlocutors’ contextual expectations are generally in line or they interact multiple times in an informative context, enabling for the alignment of their expectations. In light of these results meaning multiplicity can be understood as an opportunistic outcome enabled and shaped by linguistic adaptation and contextual information. 1Meaning Multiplicity in Communication 2Ambiguous Signalling through Pragmatic Inference 2.1Preliminaries 2.2Signalling behaviour 2.3Communicative success 2.4Iterated interactions 3Predictions for Single and Iterated Interactions 3.1Simulations 3.2Exploration and past experience 3.3Preemptive adaptation 4Discussion 5Conclusion Appendix. (shrink)

One of the conceptual limitations of the orthodox game theory is its inability to offer definitive theoretical predictions concerning the outcomes of noncooperative games with multiple rationalizable outcomes. This prompted the emergence of goal-directed theories of reasoning – the team reasoning theory and the theory of hypothetical bargaining. Both theories suggest that people resolve non-cooperative games by using a reasoning algorithm which allows them to identify mutually advantageous solutions of non-cooperative games. The primary aim of this thesis is to enrich (...) the current debate on goaldirected reasoning theories by studying the extent to which the principles of the bargaining theory can be used to formally characterize the concept of mutual advantage in a way which is compatible with some of the conceptually compelling principles of orthodox game theory, such as individual rationality, incentive compatibility, and non-comparability of decision-makers’ personal payoffs. I discuss two formal characterizations of the concept of mutual advantage derived from the aforementioned goal-directed reasoning theories: A measure of mutual advantage developed in collaboration with Jurgis Karpus, which is broadly in line with the notion of mutual advantage suggested by Sugden, and the benefit-equilibrating bargaining solution function, which is broadly in line with the principles underlying Conley and Wilkie’s solution for Pareto optimal point selection problems with finite choice sets. I discuss the formal properties of each solution, as well as its theoretical predictions in a number of games. I also explore each solution concept’s compatibility with orthodox game theory. I also discuss the limitations of the aforementioned goal-directed reasoning theories. I argue that each theory offers a compelling explanation of how a certain type of decision-maker identifies the mutually advantageous solutions of non-cooperative games, but neither of them offers a definitive answer to the question of how people coordinate their actions in non-cooperative social interactions. (shrink)