Theory of mind and strategic decision-making

Abstract

Small talk is a ubiquitous feature of social interaction but almost by definition seems to have little strategic importance and has hardly been studied within the social sciences. In a laboratory setting with 338 subjects, we show that short seemingly unimportant communication between players who know nothing about the games that are to follow (and so cannot engage in cheap talk) nevertheless has a dramatic and important effect. Through small talk players were able to better predict the personalities of their partners (especially their level of extraverion) building a sensible "theory of mind" which in turn boosted their payoffs in subsequent public goods and level-k reasoning games. Important psychological factors such as perceived similarity and self-projection also proved important. Additional insight is provided by text analysis on the language used during communication which indicates how theory of mind can be developed through trivial and seemingly irrelevant small talk.

The role of personality beliefs and “small talk” in strategic behaviour

“…The participants were undergraduate, postgraduate and (non-academic) staff members at the University. The experiment was implemented using Z-tree [47] and pre-registered with the AEA RCT registry [48]. The experiment received ethical approval from Economics Department Internal Ethical Approval Process, University of Warwick.…”