Games2014, 5(1), 53-89; doi:10.3390/g5010053 - published online 25 February 2014 Show/Hide Abstract
Abstract: Thomas Schelling was recognized by the Nobel Prize committee as a pioneer in the application of game theory and rational choice analysis to problems of politics and international relations. However, although he makes frequent references in his writings to this approach, his main explorations and insights depend upon and require acknowledgment of its limitations. One of his principal concerns was how a country could engage in successful deterrence. If the behavioral assumptions that commonly underpin game theory are taken seriously and applied consistently, however, nuclear adversaries are almost certain to engage in devastating conflict, as John von Neumann forcefully asserted. The history of the last half century falsified von Neumann’s prediction, and the “event that didn’t occur” formed the subject of Schelling’s Nobel lecture. The answer to the question “why?” is the central concern of this paper.
Games2014, 5(1), 26-52; doi:10.3390/g5010026 - published online 14 February 2014 Show/Hide Abstract
Abstract: This paper presents an experiment that evaluates the effect of financial incentives and complexity in political science voting experiments. To evaluate the effect of complexity we adopt a level-k reasoning model concept. This model by Nagel  postulates that players might be of different types, each corresponding to the level of reasoning in which they engage. Furthermore, to postulate the effect of financial incentives on subjects’ choice, we used the Quantal Response Equilibrium (QRE) concept. In a QRE, players’ decisions are noisy, with the probability of playing a given strategy increasing in its expected payoff. Hence, the choice probability is a function of the magnitude of the financial incentives. Our results show that low complexity promotes the highest degree of level-k strategic reasoning in every payment treatment. Standard financial incentives are enough to induce equilibrium behavior, and the marginal effect of extra incentives on equilibrium behavior seems to be negligible. High complexity, instead, decreases the rate of convergence to equilibrium play. With a sufficiently high complexity, increasing payoff amounts does promote more strategic behavior in a significant manner. Our results show with complex voting games, higher financial incentives are required for the subjects to exert the effort needed to complete the task.
Games2014, 5(1), 1-25; doi:10.3390/g5010001 - published online 30 January 2014 Show/Hide Abstract
Abstract: The paper presents an evolutionary model, based on the assumption that agents may revise their current strategies if they previously failed to attain the maximum level of potential payoffs. We offer three versions of this reflexive mechanism, each one of which describes a distinct type: spontaneous agents, rigid players, and ‘satisficers’. We use simulations to examine the performance of these types. Agents who change their strategies relatively easily tend to perform better in coordination games, but antagonistic games generally lead to more favorable outcomes if the individuals only change their strategies when disappointment from previous rounds surpasses some predefined threshold.
Games2013, 4(4), 776-794; doi:10.3390/g4040776 - published online 18 December 2013 Show/Hide Abstract
Abstract: In this paper, we claim that agents confronting with new interactive situations apply behavioral heuristics that drastically reduce the problem complexity either by neglecting the other players’ incentives, or by restricting attention to subsets of “salient” outcomes. We postulate that these heuristics are sensitive to the manipulation of those features that can be modified without altering the (Nash) equilibrium structure of the game. We call these features “descriptive”. We test experimentally the effect of these descriptive features on both choice behavior and cross-game similarity perception. Analysis of individual choices confirms our hypotheses, and suggests that non-equilibrium choices may derive from simplified mental models of the game structure, rather than from heterogeneous beliefs or limited iterative thinking. In addition, subjects tend to behave similarly in games sharing similar descriptive features, regardless of their strategic structure.
Games2013, 4(4), 754-775; doi:10.3390/g4040754 - published online 10 December 2013 Show/Hide Abstract
Abstract: Prompted by a real-life observation in the UK retail market, a two-player Prisoners’ Dilemma model of an alliance between two firms is adapted to include the response of a rival firm, resulting in a version of a three-player Prisoners’ Dilemma. We use this to analyse the impact on the stability of the alliance of the rival’s competition, either with the alliance or with the individual partners. We show that, while strong external pressure on both partners can cause Ally-Ally to become a Nash equilibrium for the two-player Prisoners’ Dilemma, weak or asymmetric pressure that plays on the partners’ differing objectives can undermine the alliance. As well as providing new insights into how allies should respond if the alliance is to continue, this also illustrates how a third party can most effectively cause the alliance to become unsustainable. We create a new game theoretic framework, adding value to existing theory and the practice of alliance formation and sustainability.