Stochastic game theory: For playing games, not just for doing theory

Recent theoretical advances have dramatically increased the relevance of game theory for predicting human behavior in interactive situations. By relaxing the classical assumptions of perfect rationality and perfect foresight, we obtain much improved explanations of initial decisions, dynamic patterns of learning and adjustment, and equilibrium steady-state distributions.

Game theory and reciprocity in some extensive form experimental games

We examine decision making in two-person extensive form game trees using nine treatments that vary matching protocol, payoffs, and payoff information. Our objective is to establish replicable principles of cooperative versus noncooperative behavior that involve the use of signaling, reciprocity, and backward induction strategies, depending on the availability of dominated direct punishing strategies and the probability of repeated interaction with the same partner. Contrary to the predictions of game theory, we find substantial support for cooperation under complete information even in various single-play treatments.

Working memory constrains human cooperation in the Prisoner’s Dilemma

Many problems in human society reflect the inability of selfish parties to cooperate. The “Iterated Prisoner’s Dilemma” has been used widely as a model for the evolution of cooperation in societies. Axelrod’s computer tournaments and the extensive simulations of evolution by Nowak and Sigmund and others have shown that natural selection can favor cooperative strategies in the Prisoner’s Dilemma. Rigorous empirical tests, however, lag behind the progress made by theorists. Clear predictions differ depending on the players’ capacity to remember previous rounds of the game. To test whether humans use the kind of cooperative strategies predicted, we asked students to play the iterated Prisoner’s Dilemma game either continuously or interrupted after each round by a secondary memory task (i.e., playing the game “Memory”) that constrained the students’ working-memory capacity. When playing without interruption, most students used “Pavlovian” strategies, as predicted, for greater memory capacity, and the rest used “generous tit-for-tat” strategies. The proportion of generous tit-for-tat strategies increased when games of Memory interfered with the subjects’ working memory, as predicted. Students who continued to use complex Pavlovian strategies were less successful in the Memory game, but more successful in the Prisoner’s Dilemma, which indicates a trade-off in memory capacity for the two tasks. Our results suggest that the set of strategies predicted by game theorists approximates human reality.