Announcements For Tuesday, Oct. 21 st : Problem Set 6 For Tuesday, Oct. 21 st : Problem Set 6 For Thursday, Oct. 23 rd : Dating Survey (link to be sent out; due by 9 a.m.) For Thursday, Oct. 23 rd : Dating Survey (link to be sent out; due by 9 a.m.) Reading for Thursday: To be posted on Course Reserves Reading for Thursday: To be posted on Course Reserves

An Experimental Game This game is played by two people, designated A and B. This game is played by two people, designated A and B. Each player has the opportunity to cooperate or defect. Each player has the opportunity to cooperate or defect.

A C D B CD A:$30 B:$30 A:$10 B:$45 A:$15 B:$15 A:$45 B:$10

A C D B CD A:$30 B:$30 A:$10 B:$45 A:$15 B:$15 A:$45 B:$10

The Sequential Game This game is played by two people, designated A and B. This game is played by two people, designated A and B. Player A plays first and can either cooperate or defect. Player A plays first and can either cooperate or defect. Player B sees A’s choice and can then choose to either cooperate or defect. Player B sees A’s choice and can then choose to either cooperate or defect.

A C D B CD A:$30 B:$30 A:$10 B:$45 A:$15 B:$15 A:$45 B:$10 Player A goes first without knowing what B will do. Player B goes second after learning A’s response.

The Sequential Game Question 1: Being the First Mover In this version of the game you are Player A. In this version of the game you are Player A. You choose to cooperate or defect with no knowledge of Player B’s behavior. You choose to cooperate or defect with no knowledge of Player B’s behavior.

A C D B C D A:$30 B:$30 A:$10 B:$45 A:$15 B:$15 A:$45 B:$10 Player A goes first without knowing what B will do. Player B goes second after learning A’s response.

The Sequential Game Question 2: Playing with a Cooperator In this version of the game you are Player B. In this version of the game you are Player B. Player A has chosen to cooperate. Player A has chosen to cooperate. You can choose to cooperate or defect. You can choose to cooperate or defect.

A C D B CD A:$30 B:$30 A:$10 B:$45 Player A goes first without knowing what B will do. Player B goes second after learning A’s response.

The Sequential Game Question 3: Playing with a Defector In this version of the game you are Player B. In this version of the game you are Player B. Player A has chosen to defect. Player A has chosen to defect. You can choose to cooperate or defect. You can choose to cooperate or defect.

A C D B CD A:$15 B:$15 A:$45 B:$10 Player A goes first without knowing what B will do. Player B goes second after learning A’s response.

The Sequential Game Question 4: What if You Can Punish? We are going to play all three versions of the game again, but with a twist: We are going to play all three versions of the game again, but with a twist: A defector can be punished. For every $1 paid to punish a defector, the defector loses $5. For every $1 paid to punish a defector, the defector loses $5.

A C D B CD A:$30 B:$30 A:$10 B:$45 A:$15 B:$15 A:$45 B:$10 Player A goes first without knowing what B will do. Player B goes second after learning A’s response. For every $1 invested in punishment, you remove $5 from a defector.

The Sequential Game Question 5: How Well Do You Know Each Other? How do you think people will behave in the game? How do you think people will behave in the game? For two of the questions, someone who guessed closest to the actual data will receive ten dollars. For two of the questions, someone who guessed closest to the actual data will receive ten dollars.

Module 1: Evolution and Economics An Introduction to Game Theory

Prisoner’s Dilemma

A Silent Betray B SilentBetray Each serves six months A serves ten years, B goes free Each serves five years B serves ten years, A goes free

Prisoner’s Dilemma A C D B CD A:$30 B:$30 A:$10 B:$45 A:$15 B:$15 A:$45 B:$10

Game Theory The use of mathematics to determine the optimal strategy in a competitive game played by multiple individuals. The use of mathematics to determine the optimal strategy in a competitive game played by multiple individuals.

Le Her Player 1Player 2

Le Her Player 1Player 2 Player 1 can choose to: Keep the dealt card or Trade cards

Le Her Player 1Player 2 Player 2 can then: Keep the card he has or Take the top card

Le Her What’s the best way to play? Pierre Remond de Montmort says… So, Player 2 should always stick with a card above eight. Player 1 should always stick with a card above seven. Player 1Player 2

Le Her And what do I do with an eight? But what do I do with a seven? Player 1Player 2

Le Her Player 1Player 2 Pierre Remond de Montmort says… I’m not really sure...

Le Her Player 1Player 2 To which Earl Waldegrave responds… Player 2 should switch an eight or higher at a frequency of 3/8. Player 1 should trade a seven or lower at a frequency of 5/8.

Le Her Player 1Player 2 But he notes that this… …Does not seem to be in the usual rules of play.

Checkers

Othello

Chess

Go

Discussion Section Games Game 1: Risk Game 1: Risk Game 2: Ambiguity Game 2: Ambiguity Game 3: Delayed Payoffs Game 3: Delayed Payoffs

Prisoner’s Dilemma A Silent Betray B SilentBetray Each serves six months A serves ten years, B goes free Each serves five years B serves ten years, A goes free

Prisoner’s Dilemma A C D B CD A:$30 B:$30 A:$10 B:$45 A:$15 B:$15 A:$45 B:$10

Rational Choice Theory Revised Objective Reality Objective Reality Behavior that is rational as viewed by the experimenter. Behavior that is rational as viewed by the experimenter. Subjective Reality Subjective Reality Behavior that is rational given the perceptions of the subject. Behavior that is rational given the perceptions of the subject.

Evolutionary Game Theory How do we behave? How do we behave? Why would that behavior be adaptive? Why would that behavior be adaptive?

Player 1 can then give as much or as little of the money as he or she wants to Player 2. Player 2 can approve of the amount given, and both keep the money. Evolutionary Game Theory: Ultimatum Game Player 1Player 2 Or Player 2 can refuse the offer, and no one gets any money.

Evolutionary Game Theory: Prisoner’s Dilemma What are we measuring? What are we measuring?

Evolutionary Game Theory: Punishment What are we measuring now? What are we measuring now?

Evolutionary Game Theory: Familiarity

Evolutionary Game Theory: Public Opinion

Evolutionary Game Theory: Gender Differences

What Have We Learned? Human behavior includes an intrinsic sense of cooperation and trust. Human behavior includes an intrinsic sense of cooperation and trust. Punishment works to maintain this and people will choose to punish. Punishment works to maintain this and people will choose to punish.