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Games 2017, 8(1), 2; doi:10.3390/g8010002

Economic Harmony: An Epistemic Theory of Economic Interactions

1
Department of Psychology, University of Haifa, Abba Khoushy Avenue 199, Haifa 3498838, Israel
2
Department of Philosophy, Al Quds University, East Jerusalem and Abu Dies, P.O.B. 51000, Palestine
Academic Editors: Paul Weirich and Ulrich Berger
Received: 16 September 2016 / Revised: 12 December 2016 / Accepted: 18 December 2016 / Published: 3 January 2017
(This article belongs to the Special Issue Epistemic Game Theory and Logic)
View Full-Text   |   Download PDF [1080 KB, uploaded 3 January 2017]   |  

Abstract

We propose an epistemic theory of micro-economic interactions, termed Economic Harmony. In the theory, we modify the standard utility, by changing its argument from the player’s actual payoff, to the ratio between the player’s actual payoff and his or her aspired payoff. We show that the aforementioned minor epistemic modification of the concept of utility is quite powerful in generating plausible and successful predictions of experimental results, obtained in the standard ultimatum game, and the sequential common pool resource dilemma (CPR) game. Notably, the cooperation and fairness observed in the studied games are accounted for without adding an other-regarding component in the players’ utility functions. For the standard ultimatum game, the theory predicts a division of φ and 1 − φ, for the proposer and responder, respectively, where φ is the famous Golden Ratio (≈0.618), most known for its aesthetically pleasing properties. We discuss possible extensions of the proposed theory to repeated and evolutionary ultimatum games. View Full-Text
Keywords: epistemic; aspiration level; fairness; ultimatum game; common pool resource dilemma; golden ratio; Fibonacci numbers epistemic; aspiration level; fairness; ultimatum game; common pool resource dilemma; golden ratio; Fibonacci numbers
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This is an open access article distributed under the Creative Commons Attribution License which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited. (CC BY 4.0).

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Suleiman, R. Economic Harmony: An Epistemic Theory of Economic Interactions. Games 2017, 8, 2.

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