Progress in behavioral game theory

AmericanEconomicAssociationProgressinBehavioralGameTheoryAuthor(s):ColinF.CamererSource:TheJournalofEconomicPerspectives,Vol.11,No.4(Autumn,1997),pp.167-188Publishedby:AmericanEconomicAssociationStableURL::16/12/201007:34YouruseoftheJSTORarchiveindicatesyouracceptanceofJSTOR'sTermsandConditionsofUse,availableat://=aea.EachcopyofanypartofaJSTORtransmissionmustcontainthesamecopyrightnoticethatappearsonthescreenorprintedpageofsuchtransmission.JSTORisanot-for-profitservicethathelpsscholars,researchers,andstudentsdiscover,use,andbuilduponawiderangeofcontentinatrusteddigitalarchive.Weuseinformationtechnologyandtoolstoincreaseproductivityandfacilitatenewformsofscholarship.FormoreinformationaboutJSTOR,[e-mail]ioniscollaboratingwithJSTORtodigitize,preserveandextendaccesstoTheJournalofEconomicPerspectives.(mostlyexperi-ments),andchartsamiddlecoursebetweenover-rationalequilibriumanalysesandunder-rationaladaptiveanalyses.TherecipeforbehavioralgametheoryIwilldescribe'hasthreesteps:startwithagameornaturallyoccurringsituationinwhichstandardgametheorymakesaboldpredictionbasedononeortwocrucialprinciples;ifbehaviordiffersfrom'InterestedreadersfamiliarwithgametheoryshouldreadCrawford(1997),whoseapproachismoreeclecticthanmine.Heconcludes(p.236)thatmoststrategicbehaviorcanbeunderstoodviaasynthesisthatcombineselementsfromeachoftheleadingtheoreticalframeworks[traditionalgametheory,evo-lutionarygametheory,andadaptivelearning]withamodicumofempiricalinformationaboutbehavior...Behavioralgametheoryaddspsychologicalinterpretationstothissynthesis.*ColinF.CamererisReaandLelaG.AxlineProfessorofBusinessEconomics,CaliforniaInstituteofTechnology,Pasadena,California.Hise-mailaddressis([e-mail]).168JournalofEconomicPerspectivestheprediction,thinkofplausibleexplanationsforwhatisobserved;andextendformalgametheorytoincorporatetheseexplanations.Thispaperconsidersthreecategoriesofmodellingprinciplesandcataloguesviolationsoftheseprinciples.Thefirstsectionwillfocusoncasesinwhichplayers,ratherthanfocusingself-interestedlyontheirownpayoffalone,seemtorespondintermsrelatedtosocialutility,showingconcernsaboutfairnessandtheperceivedintentionsofotherplay-ers.Thenextsectionwillfocusonproblemsofchoiceandjudgment:casesinwhichplayersrespondtodifferencesinhowthegameisdescribed,ratherthantotheoutcomes,andinwhichplayerssystematicallyoverestimatetheirowncapabilities.Athirdsectionwillinvestigatesomeelementsthatpeoplebringtostrategicsitua-tionsthatareusuallyunaccountedforingametheory:acommonawarenessofcertainfocalpointsforagreement,abeliefthattimingofachoicemayconferprivilegedstatusorchangeplayers'thinking,andanaturalinstincttolookonlyoneortwolevelsintoproblemsthatpermitmanylevelsofiteratedreasoning.Organizingfindingsinthiswayisliketakingacarengineapartandspreadingouttheparts,sothateachpartcanbeinspectedseparatelyandbrokenonesre-placed.Thehopeisthatworkingpartsandnecessaryreplacementscanlaterbereassembledintocoherenttheory.Justastherebuiltcarengineshouldrunbetterthanbefore,theeventualgoalinbehavioralgametheoryistobeabletotakeadescriptionofastrategicsituationandpredictactualbehavioratleastaswellascurrenttheoriesdo.Betterdescriptiveprinciplesshouldalsoimprovetheprescrip-tivevalueofgametheory,sinceplayerswhodesiretoplayrationallyneedtoknowhowothersarelikelytoplay.Simplegamesarealsousefulforestablishingphenomenathatshouldbein-corporatedintoeconomicsbeyondgametheory.Inexperiments,peopleroutinelyrejectprofi