Risk sensitivity and theory of mind in human coordination

Abstract

What humans do when exposed to uncertainty, incomplete information, and a dynamic environment influenced by other agents remains an open scientific challenge with important implications in both science and engineering applications. In these contexts, humans handle social situations by employing elaborate cognitive mechanisms such as theory of mind and risk sensitivity. Here we resort to a novel theoretical model, showing that both mechanisms leverage coordinated behaviors among self-regarding individuals. Particularly, we resort to cumulative prospect theory and level-k recursions to show how biases towards optimism and the capacity of planning ahead significantly increase coordinated, cooperative action. These results suggest that the reason why humans are good at coordination may stem from the fact that we are cognitively biased to do so.

Neurocomputations of strategic behavior: From iterated to novel interactions

“…To provide a better comparison against other learning rules, only one of the belief learning strategies (i.e., action-based learning) is illustrated here, although belief learning can be achieved by differential algorithmic processes. Mental-state learning involves learning about various mental states, including but not limited to the "states" of others' preferences (Ferreira et al, 2021), pro-sociality tendency (Ray et al, 2008), and the level of sophistication in strategic reasoning (Yoshida et al, 2008). The dashed lines reflect potential relationships that may or may not exist depending on the specific interactive scenario sophisticated opponents (Camerer, 2011;Fudenberg & Levine, 1998;Hampton et al, 2008;Seo et al, 2014;Zhu et al, 2012).…”

“…Much of the previous research on strategic interactions has been focusing on learning paradigms (Fudenberg & Levine, 1998), where agents interact with one another repeatedly and adjust their behavior according to the outcomes and feedbacks arising from past interactions (Abe & Lee, 2011; Ferreira et al, 2021; Hampton et al, 2008; King‐Casas et al, 2005; Ong et al, 2020; Park et al, 2019; Ray et al, 2008; Yoshida et al, 2008; Yoshida, Seymour, et al, 2010; Zhu et al, 2012). Learning paradigms provide a suitable starting point for probing neurocognitive operations of strategic behaviors for a number of reasons.…”