Psychological Game Theory
Most economic models assume that agents maximize their expected monetary payoff. However, subjects in the lab exhibit persistent and significant deviations from this self-interested maximizing behavior. A reasonable explanation for this behavior is that players can be motivated not only by monetary payoffs but also by what are referred to as ‘psychological utilities.’
These are related to preferences that are in some degree ‘other regarding’: they take others into account. Traditional game theory does not provide enough tools to adequately describe many of these preferences: the traditional approach assumes that utilities only depend on the actions that are chosen by the players. By contrast, when players are emotional or motivated by reciprocity or social respect, their utilities may also directly depend on the beliefs (about choices, beliefs, or information) they hold. When we deal with intention-based feelings, emotions and social norms, i.e. belief-dependent motivations, we need to turn to Psychological Game Theory. This quite new framework focuses on strategic settings where at least one player has belief-dependent motivations or believes, with a certain probability, that one of his opponents has belief-dependent motivations. Nonetheless, it allows for every other kind of social preferences. In that sense, it can be interpreted as a generalization of the traditional game theory.
Since the seminal article by Geanakoplos, Pearce and Stacchetti (GEB 1989), several well-known game theorists (e.g., Pierpaolo Battigalli, Martin Dufwenberg, Georg Kirchsteiger, and Matthew Rabin) and experimental economists (e.g., Gary Charness, Armin Falk, Ernst Fehr, Urs Fischbacher, Simon Gachter, Uri Gneezy, and Heike Hennig-Schmidt) have produced psychological-game theoretic articles (and test of these theories) published on top-5 general journals and top-field journals in Economics.
Due to the spread of this methodology especially among behavioral economists – e.g., 1,950 citations for Dufwenberg & Kirchsteiger (GEB 2004), and 1,250 citations for Charness & Dufwenberg (Econometrica 2006) – the 1st Workshop on Psychological Game Theory has been organized in June 2016 (University of Gothenburg). The 2nd Workshop on Psychological Game Theory (July 2017, University of East Anglia Norwich) has been preceded by the 1st Summer School on Psychological Game Theory, where 30 PhD students attended classes by experts in the field.
The 3rd Workshop and 2nd Summer School of Psychological Game Theory, subtitled “Modeling Belief-Dependent Emotions with Game Theory,” are meant to commemorate the 30th anniversary of the seminal paper by Geanakoplos, Pearce & Stacchetti (GEB 1989) called “Psychological games and sequential rationality”, and the 20th anniversary of an intriguing article by Jon Elster (JEL 1998) called “Emotions and Economic Theory.”
The former was the first (theoretical) study showing the inadequacy of traditional methods in representing belief-dependent preferences, and developed extensions of traditional game theory so as to deal with the matter.
The latter (psychological) paper has inspired many theoretical and experimental studies of belief-dependent motivations, as Elster stressed explicitly how emotions depend on beliefs, hence anticipating that key theme of psychological game theory (Elster (1998) argues that a key feature of emotions is that ‘they are triggered by beliefs’ (p. 49). He discusses, inter alia, anger, hatred, guilt, shame, pride, admiration, regret, rejoicing, disappointment, elation, fear, hope, joy, grief, envy, malice, indignation, jealousy, surprise, boredom, sexual desire, enjoyment, worry, and frustration).
With this, the workshop is meant to bring together psychologists and game theorists so that the former provide the latter – as Elster did 20 years ago – with hints about how to model new belief-dependent emotions, and the latter use the most recent extensions of Geanakoplos, Pearce and Stacchetti (1989) to theoretically and experimentally study the strategic impact of emotions.
We encourage submissions of game-theoretic works modeling belief-dependent emotions, and related experimental economic studies. We would also like to receive submissions of papers of psychologists able to stress the economic importance of specific emotions, and to point out features that might link the emotions that they discuss to the formal framework of psychological game theory.
In the same line, summer school lectures will try to: (i) combine theoretical modeling with the intuitions behind assumptions and solution concepts, and (ii) add illustrative examples and simple applications of the strategic analysis of games with belief-dependent preferences. We see the workshop and the summer school as great opportunity to extend the application of psychological games by involving psychologists interested in using game-theoretic tools and intuitions to study interactive emotions.