The Chain Store Paradox
It is the purpose of this paper to present the example of a simple game in extensive form where the actual behavior of well informed players cannot be expected to agree with the clear results of game theoretical reasoning. A story about a fictitious chain store and its potential competitors is a convenient way to describe the game. This expositionary device should not be misunderstood as a model of a real situation. In view of the story the game will be called "the chain store game". The disturbing disagreement between plausible game behavior and game theoretical reasoning constitutes the "chain store paradox". The chain store paradox throws new light on the well known difficulties which arise in connection with the finite supergame of prisoners' dilemma game. A limited rationality approach seems to be needed in order to explain human strategic behavior. An attempt shall be made to discuss the possibility of a "tree-level theory of decision making" as an explanation of discrepancies between game theoretic analysis and human behavior.
|Date of creation:||Jul 1974|
|Contact details of provider:|| Postal: Postfach 10 01 31, 33501 Bielefeld|
Web page: http://www.imw.uni-bielefeld.de/
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Hart, Sergiu & Kohlberg, Elon, 1974.
"Equally distributed correspondences,"
Journal of Mathematical Economics,
Elsevier, vol. 1(2), pages 167-174, August.
- Hart, Sergiu & Kohlberg, Elon, 2017. "Equally distributed correspondences," Center for Mathematical Economics Working Papers 11, Center for Mathematical Economics, Bielefeld University.
- Lester B. Lave, 1962. "An Empirical Approach to the Prisoners' Dilemma Game," The Quarterly Journal of Economics, Oxford University Press, vol. 76(3), pages 424-436.
- Melvin Guyer & John Fox & Henry Hamburger, 1973. "Format Effects in the Prisoner's Dilemma Game," Journal of Conflict Resolution, Peace Science Society (International), vol. 17(4), pages 719-744, December.
- Reinhard Selten, 1973. "A Simple Model of Imperfect Competition, where 4 are Few and 6 are Many," Center for Mathematical Economics Working Papers 008, Center for Mathematical Economics, Bielefeld University.
- Selten, Reinhard, 2017. "A simple model of imperfect competition, where 4 are few and 6 are many," Center for Mathematical Economics Working Papers 8, Center for Mathematical Economics, Bielefeld University.