A Map of Ecologically Rational Heuristics for Uncertain Strategic Worlds

Psychological review (2019), Doi.org/10.1037/rev0000171

Posted: 1 Nov 2018 Last revised: 22 Dec 2019

See all articles by Leonidas Spiliopoulos

Leonidas Spiliopoulos

Max Planck Society for the Advancement of the Sciences - Max Planck Institute for Human Development

Ralph Hertwig

Max Planck Society for the Advancement of the Sciences - Max Planck Institute for Human Development

Date Written: 2019

Abstract

The ecological rationality of heuristics has been extensively investigated in the domain of individual decision making. In strategic decision making, however, the focus has been on repeated games, and there is a lack of research on 1-shot games, where opponents and the game itself can vary from one interaction to another. Mapping the performance of simple versus more complex decision policies (or strategies) from the experimental game theory literature is an important first step in this direction. We investigate how 10 policies fare conditional on strategic properties of the games and 2 classes of uncertainty. The strategic properties are the complexity (number of actions) and the degree of harmony (competitiveness) of the games. The first class of uncertainty is environmental (or payoff) uncertainty, arising from missing payoff values. The second class is strategic uncertainty about the type of opponent a player is facing. Policies’ performance was measured by 3 criteria: a mean criterion averaging over the whole set of opponent policies, a maxmin criterion capturing the worst-case scenario and another criterion measuring robustness to different distributions of opponent policies. Heuristics performed well and were more robust than complex policies such as pure-strategy Nash equilibria, while simultaneously requiring significantly less information and fewer computational resources. Our ranking of the decision policies’ performance was closely aligned to their prevalence in experimental studies of games. In particular, the Level-1 policy, which completely ignores an opponent’s payoffs and uses equal weighting to determine the expected payoffs of different actions, exhibited a robust beauty.

Keywords: game theory, strategic uncertainty, fast and frugal heuristics, ecological rationality, bounded rationality, one shot games

JEL Classification: C72, D81, C15, C91

Suggested Citation

Spiliopoulos, Leonidas and Hertwig, Ralph, A Map of Ecologically Rational Heuristics for Uncertain Strategic Worlds (2019). Psychological review (2019), Doi.org/10.1037/rev0000171, Available at SSRN: https://ssrn.com/abstract=3263292 or http://dx.doi.org/10.2139/ssrn.3263292

Leonidas Spiliopoulos (Contact Author)

Max Planck Society for the Advancement of the Sciences - Max Planck Institute for Human Development ( email )

Lentzeallee 94
D-14195 Berlin, 14195
Germany

Ralph Hertwig

Max Planck Society for the Advancement of the Sciences - Max Planck Institute for Human Development ( email )

Lentzeallee 94
D-14195 Berlin, 14195
Germany

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Abstract Views
435
PlumX Metrics