Schelling Formalized: Strategic Choices of Non-Rational Personas

46 Pages Posted: 24 Jul 2008 Last revised: 1 Sep 2009

David Wolpert

Santa Fe Institute

Date Written: July 23, 2008

Abstract

We introduce a framework that explains non-rationality in non-repeated games. In our framework a player i adopts a binding "persona" - a temporary utility function --- that they honestly signal before play. By adopting a "non-rational" persona, i may cause changes in their opponents' behavior that increases $i$'s true utility. We use this framework to explain experimental data in the Traveler's Dilemma and to show how cooperation can arise in the Prisoner's Dilemma (PD). We then predict a crowding out phenomenon in the PD. We also predict a tradeoff between the robustness and the benefit of cooperation in the PD.

Keywords: Bounded rationality, Evolution of Preferences, Prisoner's dilemma, Traveler's dilemma

JEL Classification: C72

Suggested Citation

Wolpert, David, Schelling Formalized: Strategic Choices of Non-Rational Personas (July 23, 2008). Available at SSRN: https://ssrn.com/abstract=1172602 or http://dx.doi.org/10.2139/ssrn.1172602

David Wolpert (Contact Author)

Santa Fe Institute ( email )

1399 Hyde Park Road
Santa Fe, NM 897501
United States

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