Hobbes’s own justification for the existence of governments relies on the assumption that, without a government, our lives in the state of nature would result in a state of war of every man against every man. Many contemporary scholars have tried to explain why universal war is unavoidable in Hobbes’s state of nature by utilizing modern game theory. However, most game-theoretic models that have been presented so far do not accurately capture what Hobbes deems to be the primary cause of (...) conflict in the state of nature – which is uncertainty, rather than people’s egoistic psychology. Any game- theoretic model that does not incorporate uncertainty into the picture is, therefore, I claim, the wrong model. In this paper, I use Bayesian game-theory to show how universal conflict can break-out in the state of nature - even when the majority of the population would strictly prefer to cooperate and seek peace with other people - due to uncertainty about the other person’s type. Along the way, I show that the valuation of one’s own life is one of the central mechanisms that drives Hobbes’s pessimistic conclusion. (shrink)

This paper explores the cooperation mechanisms for the prisoner’s dilemma game, a canonical example for studying cooperation mechanisms, with Bayesian games. By the approach allowing simultaneous moves with the assumption that the players might be self-interested or norm-following, we establish four possible Bayesian game models, all of which are cooperation mechanisms for the prisoner’s dilemma game except for the model in which one of the two players must be self-interested.

This article proposes two interpretations of the concept of belief hierarchies in Bayesian game theory: the behaviorist interpretation and the mentalist interpretation. On the former, belief hierarchies are derived from the players’ preferences over acts. On the latter, they are causal mechanisms that are responsible for the players’ choices and preferences over acts. The claim is that the epistemic program in game theory is potentially confronted with a dilemma regarding which interpretation should be adopted. If the behaviorist interpretation of (...) belief hierarchies is retained, then Bayesian game theory cannot account for the players’ reasoning that leads to the generation of specific belief hierarchies and thus to the implementation of a specific strategy profile in a game. If the mentalist interpretation is retained, then belief hierarchies appear to be unnecessarily and unrealistically complex objects and that as a result they fail to provide reasonable epistemic foundations for various solution concepts. In other words, neither interpretation seems to allow the epistemic program to fulfill all its aims. I suggest however that the mentalist interpretation can be arranged to escape this dilemma. (shrink)

This article proposes two interpretations of the concept of belief hierarchies in Bayesian game theory: the behaviorist interpretation and the mentalist interpretation. On the former, belief hierarchies are derived from the players’ preferences over acts. On the latter, they are causal mechanisms that are responsible for the players’ choices and preferences over acts. The claim is that the epistemic program in game theory is potentially confronted with a dilemma regarding which interpretation should be adopted. If the behaviorist interpretation of (...) belief hierarchies is retained, then Bayesian game theory cannot account for the players’ reasoning that leads to the generation of specific belief hierarchies and thus to the implementation of a specific strategy profile in a game. If the mentalist interpretation is retained, then belief hierarchies appear to be unnecessarily and unrealistically complex objects and that as a result they fail to provide reasonable epistemic foundations for various solution concepts. In other words, neither interpretation seems to allow the epistemic program to fulfill all its aims. I suggest however that the mentalist interpretation can be arranged to escape this dilemma. (shrink)

The theory of rational decision has always been implicitly involved with subjunctive and counterfactual conditionals. “If I were to do A, this would happen; if I were to do B that would happen. ” When I have done A, I use the counterfactual: “If I had done B, the outcome would have been worse. ” Counterfactuals are handled so smoothly in decision theory and game theory that they are hardly ever explicitly discussed except in cases where they cause problems. For (...) many philosophers, Newcomb’s paradox was such a critical case ). In game theory, questions about beliefs off the equilibrium path in extensive form games and related issues of backward and forward induction provoked explicit discussion of counterfactuals , Bicchieri , Binmore , Harsanyi and Selten , Reny , Stalnaker , ). Where subjunctive conditionals cause problems, we need an explicit theory. What theory should we use? There is the selection function semantics of Stalnaker based on the idea of “most similar possible world in which the antecedent is true”, and related theories of Woodruff , Lewis , Pollock , Nute , which relax some of Stalnaker’s assumptions. (shrink)

Games associated with congestion situations à la Rosenthal have pure Nash equilibria. This result implicitly relies on the existence of a potential function. In this paper we provide a characterization of potential games in terms of coordination games and dummy games. Second, we extend Rosenthal's congestion model to an incomplete information setting, and show that the related Bayesian games are potential games and therefore have pure Bayesian equilibria.

In single-person decision theory, Bayesian rationality requires the agent first to attach subjective probabilities to each uncertain event, and then to maximize the expected value of a von Neumann—Morgenstern utility function that is unique up to a cardinal equivalence class. When the agent receives new information, it also requires subjective probabilities to be revised according to Bayes’ rule.

We propose strategic games wherein the strategies consist of players asking each other questions and answering those questions. We study simplifications of such games wherein two players simultaneously ask each other a question that the opponent is then obliged to answer. The motivation for our research is to model conversation including the dynamics of questions and answers, to provide new links between game theory and dynamic logics of information, and to exploit the dynamic/strategic structure that, we think, lies (...) implicitly inside epistemic models for epistemic languages, and to make that structure an explicit subject of logical study. Our main contributions are: the notion of a two-person question-answer game with information goals, the existence and computation of equilibria for these games, the correspondence with Bayesian games and their equilibria, and a connection between logic and game theory namely the existence of equilibria for positive goal formulae. (shrink)

This paper develops a formal model of the subtle meaning differences that exist between grammatical alternatives in socially conditioned variation and how these variants can be used by speakers as resources for constructing personal linguistic styles. More specifically, this paper introduces a new formal system, called social meaning games, which allows for the unification of variationist sociolinguistics and game-theoretic pragmatics, two fields that have had very little interaction in the past. Although remarks have been made concerning the possible usefulness (...) of game-theoretic tools in the analysis of certain kinds of socially conditioned linguistic phenomena :645–668, 1977; Dror et al. in Lang Linguist Compass 7:561–579, 2013; in Lang Linguist Compass 8:230–242, 2014; Clark in Meaningful games: Exploring language with game theory, MIT Press, Cambridge, MA, 2014, among others), a general framework uniting game-theoretic pragmatics and quantitative sociolinguistics has yet to be developed. This paper constructs such a framework through giving a formalization of the Third Wave approach to the meaning of variation using signalling games and a probabilistic approach to speaker/listener beliefs of the kind commonly used in the Bayesian game-theoretic pragmatics framework :3–44, 2016, for recent overviews). (shrink)

In this work we review the formalism used in describing the thermodynamics of first-order phase transitions from the point of view of maximum entropy inference. We present the concepts of transition temperature, latent heat and entropy difference between phases as emergent from the more fundamental concept of internal energy, after a statistical inference analysis. We explicitly demonstrate this point of view by making inferences on a simple game, resulting in the same formalism as in thermodynamical phase transitions. We show that (...) analogous quantities will inevitably arise in any problem of inferring the result of a yes/no question, given two different states of knowledge and information in the form of expectation values. This exposition may help to clarify the role of these thermodynamical quantities in the context of different first-order phase transitions such as the case of magnetic Hamiltonians. (shrink)

In a pair of controversy provoking papers1, Kadane and Larkey argued that the normative or prescriptive understanding of expected utility theory recommended that participants in a game maximize expected utility given their assessments of the probabilities of the moves that other players would make. They observed that no prescription, norm or standard of Bayesian rationality recommends how they should come to make probability judgments about the choices of other players. For any given player, it is an empirical question as (...) to whether other players are Bayes rational, judge him to be Bayes rational, etc., just as it is an empirical question as to what the other players’ goals and beliefs are. Participants in the game should, of course, use all empirical information available to them about how other players have behaved and how they are likely to behave in the given context of choice. Kadane and Larkey pointed out that rational players could participate in a game meeting these requirements without the game’s terminating with a Nash equilibrium or a result satisfying any other particular solution concept. (shrink)

Game trees (or extensive-form games) were first defined by von Neumann and Morgenstern in 1944. In this paper we examine the use of game trees for representing Bayesian decision problems. We propose a method for solving game trees using local computation. This method is a special case of a method due to Wilson for computing equilibria in 2-person games. Game trees differ from decision trees in the representations of information constraints and uncertainty. We compare the game tree (...) representation and solution technique with other techniques for decision analysis such as decision trees, influence diagrams, and valuation networks. (shrink)

This is a two-volume set that provides an introduction to non-cooperative Game Theory. Volume 1 covers the basic concepts, while Volume 2 is devoted to advanced topics. The book is richly illustrated with approximately 400 figures. It is suitable for both self-study and as the basis for an undergraduate course in game theory as well as a first-year graduate-level class. It is written to be accessible to anybody with high-school level knowledge of mathematics. At the end of each chapter there (...) is a collection of exercises accompanied by detailed answers. The book contains approximately 180 exercises. (shrink)

In An Introduction to Probability Theory and its Applications, W. Feller established a way of ending the St. Petersburg paradox by the introduction of an entrance fee, and provided it for the case in which the game is played with a fair coin. A natural generalization of his method is to establish the entrance fee for the case in which the probability of heads is θ. The deduction of those fees is the main result of Section 2. We then propose (...) a Bayesian approach to the problem. When the probability of heads is θ the expected gain of the St. Petersburg game is finite, therefore there is no paradox. However, if one takes θ as a random variable assuming values in the paradox may hold, which is counter-intuitive. In Section 3 we determine necessary conditions for the absence of paradox in the Bayesian approach and in Section 4 we establish the entrance fee for the case in which θ is uniformly distributed in, for in this case there is a paradox. (shrink)

Game-theoretic reasoning pervades economic theory and is used widely in other social and behavioural sciences. An Introduction to Game Theory International Edition, by Martin J. Osborne, presents the main principles of game theory and shows how they can be used to understand economics, social, political, and biological phenomena. The book introduces in an accessible manner the main ideas behind the theory rather than their mathematical expression. All concepts are defined precisely, and logical reasoning is used throughout. The book requires an (...) understanding of basic mathematics but assumes no specific knowledge of economics, political science, or other social or behavioural sciences. Coverage includes the fundamental concepts of strategic games, extensive games with perfect information, and coalitional games; the more advanced subjects of Bayesian games and extensive games with imperfect information; and the topics of repeated games, bargaining theory, evolutionary equilibrium, rationalizability, and maxminimization. The book offers a wide variety of illustrations from the social and behavioural sciences. Each topic features examples that highlight theoretical points and illustrations that demonstrate how the theory may be used. (shrink)

We relax the assumption that priors are common knowledge, in the standard model of games of incomplete information. We make the realistic assumption that the players are boundedly rational: they base their actions on finite-order belief hierarchies. When the different layers of beliefs are independent of each other, we can retain Harsányi's type-space, and we can define straightforward generalizations of Bayesian Nash Equilibrium and Rationalizability in our context. Since neither of these concepts is quite satisfactory, we propose a (...) hybrid concept, Mirage Equilibrium, providing us with a practical tool to work with inconsistent belief hierarchies. When the different layers of beliefs are correlated, we must enlarge the type-space to include the parametric beliefs. This presents us with the difficulty of the inherent openness of finite belief subspaces. Appealing to bounded rationality once more, we posit that the players believe that their opponent holds a belief hierarchy one layer shorter than they do and we provide alternative generalizations of BNE and Rationalizability. Finally, we show that, when beliefs are degenerate point beliefs, the definition of Mirage Equilibrium coincides with that of the generalized BNE. (shrink)

We study the equilibrium behavior of informed traders interacting with market scoring rule (MSR) market makers. One attractive feature of MSR is that it is myopically incentive compatible: it is optimal for traders to report their true beliefs about the likelihood of an event outcome provided that they ignore the impact of their reports on the profit they might garner from future trades. In this paper, we analyze non-myopic strategies and examine what information structures lead to truthful betting by traders. (...) Specifically, we analyze the behavior of risk-neutral traders with incomplete information playing in a dynamic game. We consider finite-stage and infinite-stage game models. For each model, we study the logarithmic market scoring rule (LMSR) with two different information structures: conditionally independent signals and (unconditionally) independent signals. In the finite-stage model, when signals of traders are independent conditional on the state of the world, truthful betting is a Perfect Bayesian Equilibrium (PBE). Moreover, it is the unique Weak Perfect Bayesian Equilibrium (WPBE) of the game. In contrast, when signals of traders are unconditionally independent, truthful betting is not a WPBE. In the infinite-stage model with unconditionally independent signals, there does not exist an equilibrium in which all information is revealed in a finite amount of time. We propose a simple discounted market scoring rule that reduces the opportunity for bluffing strategies. We show that in any WPBE for.. (shrink)

Mental representations remain the central posits of psychology after many decades of scrutiny. However, there is no consensus about the representational format(s) of biological cognition. This paper provides a survey of evidence from computational cognitive psychology, perceptual psychology, developmental psychology, comparative psychology, and social psychology, and concludes that one type of format that routinely crops up is the language-of-thought (LoT). We outline six core properties of LoTs: (i) discrete constituents; (ii) role-filler independence; (iii) predicate–argument structure; (iv) logical operators; (v) inferential (...) promiscuity; and (vi) abstract content. These properties cluster together throughout cognitive science. Bayesian computational modeling, compositional features of object perception, complex infant and animal reasoning, and automatic, intuitive cognition in adults all implicate LoT-like structures. Instead of regarding LoT as a relic of the previous century, researchers in cognitive science and philosophy-of-mind must take seriously the explanatory breadth of LoT-based architectures. We grant that the mind may harbor many formats and architectures, including iconic and associative structures as well as deep-neural-network-like architectures. However, as computational/representational approaches to the mind continue to advance, classical compositional symbolic structures – that is, LoTs – only prove more flexible and well-supported over time. (shrink)

Bayesian epistemology tells us with great precision how we should move from prior to posterior beliefs in light of new evidence or information, but says little about where our prior beliefs come from. It offers few resources to describe some prior beliefs as rational or well-justified, and others as irrational or unreasonable. A different strand of epistemology takes the central epistemological question to be not how to change one’s beliefs in light of new evidence, but what reasons justify a (...) given set of beliefs in the first place. We offer an account of rational belief formation that closes some of the gap between Bayesianism and its reason-based alternative, formalizing the idea that an agent can have reasons for his or her (prior) beliefs, in addition to evidence or information in the ordinary Bayesian sense. Our analysis of reasons for belief is part of a larger programme of research on the role of reasons in rational agency (Dietrich and List, Nous, 2012a, in press; Int J Game Theory, 2012b, in press). (shrink)

In earlier work I argued that using ‘vague probabilities’ did not ground any argument for significantly adjusting Bayesian decision theory. In this note I show that my earlier arguments don’t carry across smoothly to game theory. Allowing agents to have vague probabilities over possible outcomes dramatically increases the range of possible Nash equilibria in certain games, and hence arguably (but only arguably) increases the range of possible rational action.

In this paper, a problem for utility theory - that it would have an agent who was compelled to play “Russian Roulette’ with one revolver or another, to pay as much to have a six-shooter with four bullets relieved of one bullet before playing with it, as he would be willing to pay to have a six-shooter with two bullets emptied - is reviewed. A less demanding Bayesian theory is described, that would have an agent maximize expected values of (...) possible total consequence of his actions. And utility theory is located within that theory as valid for agents who satisfy certain formal conditions, that is, for agents who are, in terms of that more general theory, indifferent to certain dimensions of ‘risk’. Raiffa- and Savage-style arguments for its more general validity are then resisted. Addenda are concerned with implications for game theory, and relations between ‘utilities’ and ‘values’. (shrink)

In a Bayesian dialogue two individuals report their Bayesian updated belief about a certain event back and forth, at each step taking into account the additional information contained in the updated belief announced by the other at the previous step. Such a process, which operates through a reduction of the set of possible states of the world, converges to a commonly known posterior belief, which can be interpreted as a dynamic foundation for Aumann’s agreement result. Certainly, if two (...) individuals have diverging interests, truthfully reporting one’s Bayesian updated belief at every step might not be optimal. This observation could lead to the intuition that always truthfully reporting one’s Bayesian updated belief were the best that two individuals could do if they had perfectly coinciding interests and these were in line with coming to know the truth. This article provides an example which shows this intuition to be wrong. In this example, at some step of the process, one individual has an incentive to deviate from truthfully reporting his Bayesian updated belief. However, not in order to hide the truth, but to help it come out at the end: to prevent the process from settling into a commonly known belief—the “Aumann conditions”—on a certain subset of the set of possible states of the world, and this way make it converge to a subset of the set of possible states of the world on which it will be commonly known whether the event in question has occurred or not. The strategic movement described in this example is similar to a conversational implicature: the correct interpretation of the deviation from truthfully reporting the Bayesian updated belief thrives on it being common knowledge that the announced probability cannot possibly be the speaker’s Bayesian updated belief at this step. Finally, the argument is embedded in a game-theoretic model. (shrink)

A mistake in “Five legitimate definitions of correlated equilibrium (CE) in games with incomplete information” motivates a re-examination of some extensions of the solution concept that Aumann introduced.

본 연구는 “교육학적 추론을 위한 베이지언 모델”의 형식적 타당성 및 이 모델이 갖는 교육학적 함의와 인식론적 함의에 대해 비판적으로 검토한다.BR 베이즈주의 학습이론가들에 따르면, 교육학적 목표를 가장 잘 성취하기 위해서는 “정확한 가설”(h)에 대한 학습자의 믿음을 최대화하는 “데이터”(d)를 교사가 선택해야 한다. 달리 말하면, 학생이 추측하는 문제의 가설(개념)이 교사가 목표로 하는 바로 그 가설(개념)에 최대로 가까워지게 하는 예시를 교사가 학생에게 제공해야 한다. 이를 위해서는 교사가 생산하는 “데이터의 분포”(p teacher (d｜h))가 “가설(h)에 대한 학습자의 사후 믿음”(p learner (h｜d))을 최대화하는 데이터들을 중심으로 균등하게 분포되어야 할 것이다. (...) 학생은 처음부터 문제의 개념을 소유하고 있지 않다. 학생은 교사가 제공하는 예시를 통해서 비로소 개념을 구성해야 하는 위치에 있다. 이를 위해서 우선 교사는 학생의 인지 상태를 알고 있어야 한다. 즉 학생이 어떤 데이터를 접하게 될 때, 어떤 개념을 상상할 것이라고 교사는 예측해야 한다. 결국 교사는 “p teacher (d｜h)” 와 “p learner (h｜d)”, 양자 모두를 알아야 한다. 이러한 맥락에서 교사가 활용할 수 있는 모델이 아래와 같은 방정식이다.BR 이것이 베이지언 학습이론가들이 지지하는 “교육학적 추론 모델”이다. 그들에 따르면, 이 방정식의 해는 문제의 개념(가설)을 가장 잘 전달하게 할 예시 선택을 가능하게 하는 대안이다. 그런데 이 모델이 구체적 교육 현장에서 어떻게 적용될 수 있는가를 보기 위해서, 또한 이 모델이 가지는 논리-형식적 타당성 및 교육-인식론적 함의를 이해하기 위해서, 필자는 베이지언 이론가들이 제시하는 많은 예시들 중에서 가장 단순한 예시인 “선 게임 이론”(theory of line game)을 분석하고자 한다.BR. (shrink)

This study attempts to analyse the relationship between two key psychological variables associated with performance in sports - Self-Determined Motivation and Competitive Anxiety - through Bayesian Networks analysis. We analysed 674 university students/athletes from 44 universities that competed at the University Games in México, with an average age of 21 years (SD = 2.07) and with a mean of 8.61 years’ (SD = 5.15) experience in sports. Methods: Regarding the data analysis, first a CHAID algorithm was carried out (...) to determine the dependence links between variables, and then a Bayesian networks was developed. The validation of the BN revealed AUC values ranging from 0.5 to 0.92. Subsequently, various instantiations were performed with hypothetical values applied to the “bottom” variables. Results showed two probability trees that have extrinsic motivation and amotivation at the top, while the anxiety/activation due to worries about performance was at the bottom of the probabilities. The instantiations carried out support the existence of these probabilistic relationships, demonstrating their scarce influence on anxiety about competition generated by the intrinsic motivation, and the complex probabilistic effect of introjected and identified regulation regarding the appearance of anxiety due to worry about performance. (shrink)

How does Bayesian reasoning support participation in a game's Nash equilibrium? This paper provides an answer.

Recently in epistemology a number of authors have mounted Bayesian objections to dogmatism. These objections depend on a Bayesian principle of evidential confirmation: Evidence E confirms hypothesis H just in case Pr(H|E) > Pr(H). I argue using Keynes' and Knight's distinction between risk and uncertainty that the Bayesian principle fails to accommodate the intuitive notion of having no reason to believe. Consider as an example an unfamiliar card game: at first, since you're unfamiliar with the game, you (...) assign credences based on the indifference principle. Later you learn how the game works and discover that the odds dictate you assign the very same credences. Examples like this show that if you initially have no reason to believe H, then intuitively E can give you reason to believe H even though Pr(H|E) ≤ Pr(H). I show that without the principle, the objections to dogmatism fail. (shrink)

The concept of burden of proof is used in a wide range of discourses, from philosophy to law, science, skepticism, and even in everyday reasoning. This paper provides an analysis of the proper deployment of burden of proof, focusing in particular on skeptical discussions of pseudoscience and the paranormal, where burden of proof assignments are most poignant and relatively clear-cut. We argue that burden of proof is often misapplied or used as a mere rhetorical gambit, with little appreciation of the (...) underlying principles. The paper elaborates on an important distinction between evidential and prudential varieties of burdens of proof, which is cashed out in terms of Bayesian probabilities and error management theory. Finally, we explore the relationship between burden of proof and several (alleged) informal logical fallacies. This allows us to get a firmer grip on the concept and its applications in different domains, and also to clear up some confusions with regard to when exactly some fallacies (ad hominem, ad ignorantiam, and petitio principii) may or may not occur. (shrink)

Since the seminal paper of Nash (Proc Natl Acad Sci USA 36:48–49, 1950) game theoretic literature has focused mostly on equilibrium and not on maximin (minimax) strategies. In a recent paper of Pruzhansky (Int J Game Theory 40:351–365, 2011) it was shown that under fairy general conditions maximin strategies in completely mixed games can guarantee the same expected payoff as completely mixed Nash equilibrium strategies. Based on this finding, the current paper argues that maximin strategies have important properties. For (...) instance, maximin strategies may refine Nash equilibria in subjective mixed strategies. Further, Bayesian rationality of the players may favor maximin strategies more often than Nash equilibrium strategies. The paper concludes with several suggestions for further experimental research that may shed more light on whether maximin behavior can explain reality better than Nash equilibrium. (shrink)

We develop a systematic approach to quantum probability as a theory of rational betting in quantum gambles. In these games of chance, the agent is betting in advance on the outcomes of several (finitely many) incompatible measurements. One of the measurements is subsequently chosen and performed and the money placed on the other measurements is returned to the agent. We show how the rules of rational betting imply all the interesting features of quantum probability, even in such finite gambles. (...) These include the uncertainty principle and the violation of Bell's inequality among others. Quantum gambles are closely related to quantum logic and provide a new semantics for it. We conclude with a philosophical discussion on the interpretation of quantum mechanics. (shrink)

We develop a systematic approach to quantum probability as a theory of rational betting in quantum gambles. In these games of chance the agent is betting in advance on the outcomes of several incompatible measurements. One of the measurements is subsequently chosen and performed and the money placed on the other measurements is returned to the agent. We show how the rules of rational betting imply all the interesting features of quantum probability, even in such finite gambles. These include (...) the uncertainty principle and the violation of Bell's inequality among others. Quantum gambles are closely related to quantum logic and provide a new semantics to it. We conclude with a philosophical discussion on the interpretation of quantum mechanics. (shrink)

We design a double-or-quits game to compare the speed of learning one’s specific ability with the speed of rising confidence as the task gets increasingly difficult. We find that people on average learn to be overconfident faster than they learn their true ability and we present an intuitive-Bayesian model of confidence which integrates confidence biases and learning. Uncertainty about one’s true ability to perform a task in isolation can be responsible for large and stable confidence biases, namely limited discrimination, (...) the hard–easy effect, the Dunning–Kruger effect, conservative learning from experience and the overprecision phenomenon if subjects act as Bayesian learners who rely only on sequentially perceived performance cues and contrarian illusory signals induced by doubt. Moreover, these biases are likely to persist since the Bayesian aggregation of past information consolidates the accumulation of errors and the perception of contrarian illusory signals generates conservatism and under-reaction to events. Taken together, these two features may explain why intuitive Bayesians make systematically wrong predictions of their own performance. (shrink)

We argue that a Bayesian explanation of strategic choices in games requires introducing a psychological theory of belief formation. We highlight that beliefs in epistemic game theory are derived from the actual choice of the players, and cannot therefore explain why Bayesian rational players should play the strategy they actually chose. We introduce the players’ capacity of mindreading in a game theoretical framework with the simulation theory, and characterise the beliefs that Bayes rational players could endogenously form (...) in games. We show in particular that those beliefs need not be ratifiable, and therefore that rational players can form action-dependent beliefs. (shrink)

Game-theoretic solution concepts such as Nash and Bayesian equilibrium start from an assumption that the players’ sets of possible payoffs, measured in units of von Neumann–Morgenstern utility, are common knowledge, and they go on to define rational behavior in terms of equilibrium strategy profiles that are either pure or independently randomized and which, in applications, are often taken to be uniquely determined or at least tightly constrained. A mechanism through which to obtain a common knowledge of payoff functions measured (...) in units of utility is not part of the model. This paper describes an operational method of constructing a state of common knowledge of the key parameters of the players’ utility functions in terms of conditional small bets on the game’s outcome. When the rationality criterion of joint coherence is applied in this setting, the solution of a game is typically characterized by a convex set of correlated equilibria. In the most general case, where players are risk averse, the parameters of the equilibria are risk-neutral probabilities, interpretable as products of subjective probabilities and relative marginal utilities for money, as in financial markets. Risk aversion generally enlarges the set of equilibria and may present opportunities for Pareto-improving modifications of the rules of the game. (shrink)

This paper is dedicated to the analysis of the maximin principle, which is one of the key theoretical concepts of John Rawls’s theory of justice, and the problem that this principle creates for any attempt to provide a naturalistic interpretation of Rawls’s concept of fairness . Analysis shows that maximin principle is, in fact, incompatible with the Bayesian decision theory. This paper is intended to show that recent breakthroughs in evolutionary game theory could help to reconcile the maximin principle (...) with a certain naturally emerging and evolutionary stable pattern of human social behaviour.Keywords: Maximin principle, Nash bargaining game, Evolutionary Game Theory, Evolutionary Stable Strategy, learning rules. (shrink)

Since utilities and probabilities jointly determine choices, event-dependent utilities complicate the elicitation of subjective event probabilities. However, for the usual purpose of obtaining the information embodied in agent beliefs, it is sufficient to elicit objective probabilities, i.e., probabilities obtained by updating a known common prior with that agent’s further information. Bayesians who play a Nash equilibrium of a certain insurance game before they obtain relevant information will afterward act regarding lottery ticket payments as if they had event-independent risk-neutral utility and (...) a known common prior. Proper scoring rules paid in lottery tickets can then elicit objective probabilities. (shrink)

Within the context of extensive-form (or dynamic) games, we use choice frames to represent the initial beliefs of a player as well as her disposition to change those beliefs when she learns that an information set of hers has been reached. As shown in [5], in order for the revision operation to be consistent with the AGM postulates [1], the player’s choice frame must be rationalizable in terms of a total pre-order on the set of histories. We consider four (...) properties of choice frames and show that, together with the hypothesis of a common prior, are necessary and sufficient for the existence of a plausibility order that rationalizes the epistemic state (that is, initial beliefs and disposition to revise those beliefs) of all the players. The plausibility order satisfies the properties introduced in [6] as part of a new definition of perfect Bayesian equilibrium for dynamic games. Thus the present paper provides epistemic foundations for that solution concept. (shrink)