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Behavioral Game Theory: Experiments in Strategic Interaction
Game theory, the formalized study of strategy, began in the 1940s by asking how emotionless geniuses should play games, but ignored until recently how average people with emotions and limited foresight actually play games. This book marks the first substantial and authoritative effort to close this gap. Colin Camerer, one of the field's leading figures, uses psychological principles and hundreds of experiments to develop mathematical theories of reciprocity, limited strategizing, and learning, which help predict what real people and companies do in strategic situations. Unifying a wealth of information from ongoing studies in strategic behavior, he takes the experimental science of behavioral economics a major step forward. He does so in lucid, friendly prose.
Behavioral game theory has three ingredients that come clearly into focus in this mathematical theories of how moral obligation and vengeance affect the way people bargain and trust each other; a theory of how limits in the brain constrain the number of steps of "I think he thinks . . ." reasoning people naturally do; and a theory of how people learn from experience to make better strategic decisions. Strategic interactions that can be explained by behavioral game theory include bargaining, games of bluffing as in sports and poker, strikes, how conventions help coordinate a joint activity, price competition and patent races, and building up reputations for trustworthiness or ruthlessness in business or life.
While there are many books on standard game theory that address the way ideally rational actors operate, Behavioral Game Theory stands alone in blending experimental evidence and psychology in a mathematical theory of normal strategic behavior. It is must reading for anyone who seeks a more complete understanding of strategic thinking, from professional economists to scholars and students of economics, management studies, psychology, political science, anthropology, and biology.
Behavioral game theory has three ingredients that come clearly into focus in this mathematical theories of how moral obligation and vengeance affect the way people bargain and trust each other; a theory of how limits in the brain constrain the number of steps of "I think he thinks . . ." reasoning people naturally do; and a theory of how people learn from experience to make better strategic decisions. Strategic interactions that can be explained by behavioral game theory include bargaining, games of bluffing as in sports and poker, strikes, how conventions help coordinate a joint activity, price competition and patent races, and building up reputations for trustworthiness or ruthlessness in business or life.
While there are many books on standard game theory that address the way ideally rational actors operate, Behavioral Game Theory stands alone in blending experimental evidence and psychology in a mathematical theory of normal strategic behavior. It is must reading for anyone who seeks a more complete understanding of strategic thinking, from professional economists to scholars and students of economics, management studies, psychology, political science, anthropology, and biology.
568 pages, Hardcover
First published February 25, 2003
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Displaying 1 - 6 of 6 reviews
December 28, 2010
Consider the following experiment involving two people, the Proposer and the Responder. The experimenter gives the Proposer some money, and asks him to decide, how much of it he should give to the Responder. If the Responder accepts the proposal, he gets what the Proposer decided to give him, and the Proposer is left with the rest. If the Responder rejects the proposal, the Proposer returns the money to the experimenter, and they both get nothing. Game theory tells us that the Responder should always accept, since he is getting free money, even if it is much less than the free money the Proposer is getting, and the Proposer should give as little as possible to the Responder, since he is going to accept no matter what. However, this is not what actually happens. Proposers in Pittsburgh give an average of 45% of the money to the responders, who reject 22% of all offers. Among Peruvian Indians who practice slash-and-burn agriculture, proposers give an average of 26%, and responders reject 5% of all offers. Among Indonesian whale hunters, the numbers are 58% and 20%. One study found that among American college students, economics majors offer 7% less and demand 7% more than other majors, but other studies had different results. Women tend to offer more to good-looking men than to ugly men. Third graders offer 30% on average, and fifth graders 50%. I wonder whether this experiment can distinguish between Democrats and Republicans.
There are more experiments like this described in this book, and in each people do not behave at all like game theory says they should.
There are more experiments like this described in this book, and in each people do not behave at all like game theory says they should.
July 3, 2017
Very good book, well written, well structured, perfect for teaching a Masters course.
Sometime going too much into intricacies of the author's own papers. Could go more into modeling of choices and some idea of econometric estimation techniques.
Goes well in combination with Moffatt's "Experimetrics" and with experiments on http://veconlab.econ.virginia.edu/.
The "learning" part starts at a too high level of abstraction, so I precede it with Holt's "Markets, Games and Strategic Behavior" on Bayesian Learning and Imitation.
Sometime going too much into intricacies of the author's own papers. Could go more into modeling of choices and some idea of econometric estimation techniques.
Goes well in combination with Moffatt's "Experimetrics" and with experiments on http://veconlab.econ.virginia.edu/.
The "learning" part starts at a too high level of abstraction, so I precede it with Holt's "Markets, Games and Strategic Behavior" on Bayesian Learning and Imitation.
March 12, 2018
Exhaustive review of results in the experimental game theory literature. Many classics, but may also be a bit out of date at the moment. Also, I wonder whether some of the findings contained may need to be reconsidered given the recent "replication crisis" in social science.
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March 8, 2017Unsure about how these should be formed with regards to textbooks. Will update later.
June 10, 2012
(This review is subject to expand.)
Pretty straightforward, fairly up to date experimental results on games with extensive consideration of what can go wrong in such experiments.
Experience weighted attraction seems to be an interesting learning model. Too bad, however, that the author's description is opaque and the mathematical typesetting is bad. (Actually it's described later with better formatting in the same chapter but the meaning of the experience weight is still unclear.)
Pretty straightforward, fairly up to date experimental results on games with extensive consideration of what can go wrong in such experiments.
Experience weighted attraction seems to be an interesting learning model. Too bad, however, that the author's description is opaque and the mathematical typesetting is bad. (Actually it's described later with better formatting in the same chapter but the meaning of the experience weight is still unclear.)
August 16, 2014
There are some books that open a new door of thinking for you. This book, in an absolutely simple language tell you how you think and how your brain uses it strategic thinking. It's just amazing how the author helps you understand a complicated process in simple language. 4 starts from me for this book.
Displaying 1 - 6 of 6 reviews