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What situation is this? Coarse cognition and behavior over a space of games

Author

Listed:
  • Robert Gibbons

    () (Massachusetts Institute of Technology)

  • Marco LiCalzi

    () (Dept. of Management, Università Ca' Foscari Venice)

  • Massimo Warglien

    () (Dept. of Management, Università Ca' Foscari Venice)

Abstract

We study strategic interaction between agents who distill the complex world around them into simpler situations. Assuming agents share the same cognitive frame, we show how the frame affects equilibrium outcomes. In one-shot and repeated interactions, the frame causes agents to be either better or worse off than if they could perceive the environment in full detail: it creates a fog of cooperation or a fog of conflict. In repeated interaction, the frame is as important as agentsÕ patience in determining the set of equilibria: for a fixed discount factor, when all agents coordinate on what they perceive as the best equilibrium, there remain significant performance differences across dyads with different frames. Finally, we analyze some tensions between incremental versus radical changes in the cognitive frame.

Suggested Citation

  • Robert Gibbons & Marco LiCalzi & Massimo Warglien, 2017. "What situation is this? Coarse cognition and behavior over a space of games," Working Papers 09, Department of Management, Università Ca' Foscari Venezia.
  • Handle: RePEc:vnm:wpdman:142
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    File URL: http://virgo.unive.it/wpideas/storage/2017wp09.pdf
    File Function: First version, 2017
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    References listed on IDEAS

    as
    1. Jehiel, Philippe, 2005. "Analogy-based expectation equilibrium," Journal of Economic Theory, Elsevier, vol. 123(2), pages 81-104, August.
    2. Samuelson, Larry, 2001. "Analogies, Adaptation, and Anomalies," Journal of Economic Theory, Elsevier, vol. 97(2), pages 320-366, April.
    3. Hoff, Karla & Stiglitz, Joseph E., 2016. "Striving for balance in economics: Towards a theory of the social determination of behavior," Journal of Economic Behavior & Organization, Elsevier, vol. 126(PB), pages 25-57.
    4. Grimm, Veronika & Mengel, Friederike, 2012. "An experiment on learning in a multiple games environment," Journal of Economic Theory, Elsevier, vol. 147(6), pages 2220-2259.
    5. Kreps, David M., 1990. "Game Theory and Economic Modelling," OUP Catalogue, Oxford University Press, number 9780198283812.
    6. Yuval Heller & Eyal Winter, 2016. "Rule Rationality," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 57, pages 997-1026, August.
    Full references (including those not matched with items on IDEAS)

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    Cited by:

    1. Marco LiCalzi & Roland Mühlenbernd, 2019. "Categorization and Cooperation across Games," Games, MDPI, Open Access Journal, vol. 10(1), pages 1-21, January.

    More about this item

    Keywords

    categorization; frame; mental model; small world; culture; leadership.;

    JEL classification:

    • C79 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Other
    • D01 - Microeconomics - - General - - - Microeconomic Behavior: Underlying Principles
    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
    • M14 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Corporate Culture; Diversity; Social Responsibility

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