What do you think I think you think?: Strategic reasoning in matrix games

In reasoning about strategic interpersonal situations, such as in playing games, an individual's representation of the situation often includes not only information about the goals and rules of the game, but also a mental model of other minds. Often such mental models involve a hierarchy of reflexive reasoning commonly employed in social situations (What do you think I think you think...), and may be related to the developmental notion of 'theory of mind'. In two experiments, the author's formally investigate such interpersonal recursive reasoning in college-age adults within the context of matrix games. Participants are asked to predict the moves of another player (experimenter's confederate) in a two-choice, sequential-move game that may terminate at various stages with different payoffs for each player. Participants are also asked to decide optimally on their own moves based on the prediction made. Errors concerning the prediction, or translation of those predictions into decisions about one's action, were recorded. Results demonstrate the existence of a default mental model about the other player in the game context that is dynamically modified as new evidence is accumulated. Predictions about this other player's behavior are, in general, used consistently in decision-making, though the opponent tends to be modeled, by default, to behave in a myopic fashion not anticipating the participant's own action. (C) 2002 Elsevier Science B.V. All rights reserved.