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Title: Cooperation, psychological game theory, and limitations of rationality in social interaction
Authors: Colman, Andrew M.
First Published: Apr-2003
Publisher: Cambridge University Press
Citation: Behavioral and Brain Sciences, 2003, 26, pp.139-153
Abstract: 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.
DOI Link: 10.1017/S0140525X03000050
ISSN: 0140-525X
eISSN: 1469-1825
Version: Publisher version
Status: Peer reviewed
Type: Article
Rights: Copyright © 2003 Cambridge University Press. Deposited with reference to the publisher's archiving policy available on the SHERPA/RoMEO website.
Appears in Collections:Published Articles, School of Psychology

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