Testing game theory on real people

25 Sep, 2013 at 19:19 | Posted in Economics | Comments Off on Testing game theory on real people

The “prisoner’s dilemma” is a familiar concept to just about everyone who took Econ 101 …

GametheoryYet no one’s ever actually run the experiment on real prisoners before, until two University of Hamburg economists tried it out in a recent study comparing the behavior of inmates and students.

Surprisingly, for the classic version of the game, prisoners were far more cooperative than expected.

Menusch Khadjavi and Andreas Lange put the famous game to the test for the first time ever, putting a group of prisoners in Lower Saxony’s primary women’s prison, as well as students, through both simultaneous and sequential versions of the game …

They expected, building off of game theory and behavioral economic research that show humans are more cooperative than the purely rational model that economists traditionally use, that there would be a fair amount of first-mover cooperation, even in the simultaneous simulation where there’s no way to react to the other player’s decisions.

And even in the sequential game, where you get a higher payoff for betraying a cooperative first mover, a fair amount will still reciprocate.

As for the difference between student and prisoner behavior, you’d expect that a prison population might be more jaded and distrustful, and therefore more likely to defect.

The results went exactly the other way …

The paper … demonstrates that prisoners aren’t necessarily as calculating, self-interested, and untrusting as you might expect, and as behavioral economists have argued for years, as mathematically interesting as Nash equilibrium might be, they don’t line up with real behavior all that well.

Business Insider

[h/t Geoff Kennedy]

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