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Theory of Mind and Strategic Decision-Making

Author

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  • Bose, Neha

    (University of Warwick)

  • Sgroi, Daniel

    (University of Warwick)

Abstract

In a laboratory experiment, 338 participants were asked to communicate in pairs and then play two games with their partners: the 11-20 money request game (a tool for assessing level-k reasoning) and a public goods game. The communication occurred prior to any knowledge of what was to follow but played an important rolein allowing them to develop theories or mental models of their partners (“theory of mind”) which proved to be crucial explanatory factors for decision-making. We examine the players’ beliefs about the personality and intelligence of their partner, how they play in the games and analysed the language used during communication. The results indicate that beliefs about partner’s type is biased by own-type. In particular, extraverts, characterised by positive affect, projected their positivity onto their partners. The level-k strategy chosen in the 11-20 game increased with the perceived similarity between players and in the public goods game, players cooperated more when they believed their partners to be extraverted. An analysis of the text used during communication explains how it was possible for participants to draw inferences about other’s type: for instance, use of more words and more dominant words were associated with being an extravert.

Suggested Citation

  • Bose, Neha & Sgroi, Daniel, 2019. "Theory of Mind and Strategic Decision-Making," CAGE Online Working Paper Series 409, Competitive Advantage in the Global Economy (CAGE).
  • Handle: RePEc:cge:wacage:409
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    File URL: https://warwick.ac.uk/fac/soc/economics/research/centres/cage/manage/publications/409-2019_sgroi.pdf
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    References listed on IDEAS

    as
    1. Leonardo Bursztyn & Bruno Ferman & Stefano Fiorin & Martin Kanz & Gautam Rao, 2018. "Status Goods: Experimental Evidence from Platinum Credit Cards," The Quarterly Journal of Economics, Oxford University Press, vol. 133(3), pages 1561-1595.
    2. Ann-Renée Blais & Elke U. Weber, 2006. "A Domain-Specific Risk-Taking (DOSPERT) scale for adult populations," Judgment and Decision Making, Society for Judgment and Decision Making, vol. 1, pages 33-47, July.
    3. David Gill & Victoria Prowse, 2016. "Cognitive Ability, Character Skills, and Learning to Play Equilibrium: A Level-k Analysis," Journal of Political Economy, University of Chicago Press, vol. 124(6), pages 1619-1676.
    4. Ann-Renée Blais & Elke U. Weber, 2006. "A Domain-Specific Risk-Taking (DOSPERT)Scale for Adult Populations," CIRANO Working Papers 2006s-24, CIRANO.
    5. Rustichini, Aldo & DeYoung, Colin G. & Anderson, Jon E. & Burks, Stephen V., 2016. "Toward the integration of personality theory and decision theory in explaining economic behavior: An experimental investigation," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 64(C), pages 122-137.
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    Cited by:

    1. Buchanan, Joy A., 2020. "My reference point, not yours," Journal of Economic Behavior & Organization, Elsevier, vol. 171(C), pages 297-311.

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    More about this item

    Keywords

    theory of mind; cheap talk; communication; level-k reasoning; public goods game; cooperation; extraversion; perceived similarity; self-projection bias; laboratory experiment; text analysis. JEL Classification: D91; D83; C92.;
    All these keywords.

    JEL classification:

    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior

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