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Risk sensitivity and theory of mind in human coordination

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  • Pedro L Ferreira
  • Francisco C Santos
  • Sérgio Pequito

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.Author summary: We propose a new computational model characterizing coordination among self-regarding individuals under theory of mind and risk sensitivity. Theory of mind enables decision-making based on the attribution of beliefs, knowledge, or goals to others, whereas different risk sensitivities allows one to assess the impact of different ways of valuing uncertain returns, as captured by descriptive theories from social-economic studies. Together they provide evidence that biases towards optimism, and the capacity for planning ahead, significantly increase coordinated, cooperative action.

Suggested Citation

  • Pedro L Ferreira & Francisco C Santos & Sérgio Pequito, 2021. "Risk sensitivity and theory of mind in human coordination," PLOS Computational Biology, Public Library of Science, vol. 17(7), pages 1-22, July.
    • Handle: RePEc:plo:pcbi00:1009167
    DOI: 10.1371/journal.pcbi.1009167
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