What Situation Is This? Coarse Cognition and Behavior Over a Space of Games

33 Pages Posted: 12 Sep 2017

See all articles by Robert S. Gibbons

Robert S. Gibbons

Massachusetts Institute of Technology - Sloan School and Department of Economics; National Bureau of Economic Research (NBER)

Marco LiCalzi

Dept. Management, Università Ca' Foscari Venezia

Massimo Warglien

University of Venice - Department of Business Economics & Management

Date Written: August 2017

Abstract

We study strategic interaction between agents who distill the complex world around them into simpler situations. Assuming agents share the same cognitive frame, we show how the frame affects equilibrium outcomes. In one-shot and repeated interactions, the frame causes agents to be either better or worse off than if they could perceive the environment in full detail: it creates a fog of cooperation or a fog of conflict. In repeated interaction, the frame is as important as agents’ patience in determining the set of equilibria: for a fixed discount factor, when all agents coordinate on what they perceive as the best equilibrium, there remain significant performance differences across dyads with different frames. Finally, we analyze some tensions between incremental versus radical changes in the cognitive frame.

Keywords: categorization, frame, mental model, small world, culture, leadership

JEL Classification: C79, D01, D23, L14, M14

Suggested Citation

Gibbons, Robert S. and LiCalzi, Marco and Warglien, Massimo, What Situation Is This? Coarse Cognition and Behavior Over a Space of Games (August 2017). Department of Management, Università Ca' Foscari Venezia Working Paper No. 2017 / 09. Available at SSRN: https://ssrn.com/abstract=3034826 or http://dx.doi.org/10.2139/ssrn.3034826

Robert S. Gibbons

Massachusetts Institute of Technology - Sloan School and Department of Economics ( email )

E52-432
MIT
Cambridge, MA 02142
United States
617-253-0283 (Phone)
617-258-6855 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Marco LiCalzi (Contact Author)

Dept. Management, Università Ca' Foscari Venezia ( email )

San Giobbe, Cannaregio 873
Venice, 30121
Italy
+39-0412346925 (Phone)
+39-0412347444 (Fax)

HOME PAGE: http://venus.unive.it/licalzi/

Massimo Warglien

University of Venice - Department of Business Economics & Management ( email )

Dorsoduro 3246
Venezia VE 30121, Veneto 30123
Italy

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