Ethics, Game Theory and Laboratory Experiments

Unlike many of the papers at this Conference, this paper concerns games against nature rather than games against strategically-motivated human (or computer) opponents. Nevertheless, games against nature are relevant to games against opponents - as the literature makes clear. Indeed, one of the seminal pieces of that literature, John von Neuman/Oskar Morgenstern, The Theory of Games and Economic Behaviour (1947)1, whilst ostensibly addressed to the theory of strategic games, derived one of the key elements of the theory of rational decision making against nature — namely Expected Utility theory — as a key component of the theory of strategic games. Moreover, many of the interesting new developments in Game Theory are pursuing the implications of non-Expected-Utility behaviour in games Contrariwise, some recent developments in individual decision-making, such as those related to intertemporal decision-making, are using results from the theory of games. Clearly, developments in each branch of the literature are relevant to the other branch.

Introduction Since the seminal book by Von Neumann and Morgenstern (1944), Theory of Games and Economic Behavior , game theory has progressively permeated all fields of economics (industrial organization, labor, financial and international economics) and extended its influence on the other social sciences (politics, sociology, and law). It has become an essential tool for studying interpersonal relationships and provides a rigorous and useful methodology for modeling and analyzing strategic decisions. Game theory methodology has also incited profound and far-reaching changes in the way markets, organizations, and institutions are viewed; it has contributed to better understanding the rationale of many private and public institutions, such as contracts, franchising, insurance, certification agencies, and standardization committees. This chapter is aimed at revealing the contribution of game theory to the analysis of institutions. The goal herein is not to propose an exhaustive course in game theory (for good introductions to game theory, see Gibbons 1992 or Osborne and Rubinstein 1995), but rather to focus on the main results and lessons that can be drawn from game theory with respect to institutions. Institutions may basically be characterized in two ways. They can, first, be defined as the set of fundamental political, social, and legal ground rules that establish the bases for production, exchange, and distribution (Davis and North 1971). From this perspective, institutions appear as the rules of the game imposed on all economic actors.

The article considers the transition from the empirical to the theoretical level of in-depth research of the term "economic behavior" of individuals. It is determined that the political and economic direction of research will provide a detailed objective definition of the internal economic reasons for the choice of an individual behavioral model.It isshown that economic behavior is a "reflection", an external form of economic activity of society, individual entities and their groups. The economic behavior of individuals is studied mainly from the standpoint of the empirical level of scientific knowledge. In this sense, the term reflects the real economic activity in which the subjects operate, from the outside, as a form of manifestation of their economic activity. It is the political and economic direction of research in economic theory that clarifies not only the external factors of influence or internal physiological reasons for an individual's actions, but also the internal objective grounds for forming a certain behavioral model that realizes primarily economic interests and sub status. in production and economic activities, in the process of reproduction of production, distribution, exchange, or market, consumer relations of society. Within the political and economic direction of research, structural and process-reproductive approaches are used in this way, which significantly enriches the theoretical and empirical research of the term "economic behavior". Thus, we must conclude that there is a need for in-depth analysis of behavior patterns not only of individuals but also of other economic actors, gradually moving from the empirical to the theoretical level of research, and linking behavioral patterns with changes in economic activity, and finally , with transformations of property relations and socialstatuses ofsubjects, instead of with any secondary and tertiary, etc. factors.It is determined that the deep basis of changes in models of economic behavior of individuals are changes in their economic activities, property relations, social status of the subjects of a particular society. The consequences of the application of psychophysical, behavioral, economic-sociological, economic-institutional, economic-legal directions of research, which clarify the influence of non-economic (mental, subjective-psychological, mental, legal, etc.)factors on the choice of models of human economic behavior, are described.

Optimization models have a wide range of applications in economics and game theory. This special issue of the Annals of Operations Research contains selected and refereed papers on the topic optimization models with economic and game theoretic applications. Most of the papers in this special issue were presented at the International Symposium on Applied Optimization and Game Theoretic Models (ISAOGTM13) held during January 9–11, 2013, at the Indian Statistical Institute, Delhi Centre. This International Symposiumwas designed to promote research and applications in applied optimization and game theory by bringing together leading experts and other specialists in the field around the world with young scholars. This symposium mainly focused on classical and modern optimization theory, algorithms (local and global aspects), stochastic optimization, structured optimization, as well as related topics in applied mathematics that contain applications of optimization models in economics and game theory. Around 120 participants including speakers participated in this symposium. This symposium was an event under the project optimization and reliability modeling funded by the Indian Statistical Institute. Having broad international appeal it provided an excellent opportunity to disseminate the latest major achievements and to explore new directions and perspectives, dealingwith topics of fundamental importance in applied optimization and other related sciences (economics, physics, engineering). A special session titled Professor Santosh N. Kabadi Memorial Session was organized on combinatorial optimization to recall the memory of our dear friend Professor Santosh N. Kabadi, University of New

Research Article| December 01 1992 New Insights into the Collaboration between John von Neumann and Oskar Morgenstern on the Theory of Games and Economic Behavior Urs Rellstab Urs Rellstab Search for other works by this author on: This Site Google History of Political Economy (1992) 24 (Supplement): 77–93. https://doi.org/10.1215/00182702-24-Supplement-77 Cite Icon Cite Share Icon Share Facebook Twitter LinkedIn MailTo Permissions Search Site Citation Urs Rellstab; New Insights into the Collaboration between John von Neumann and Oskar Morgenstern on the Theory of Games and Economic Behavior. History of Political Economy 1 December 1992; 24 (Supplement): 77–93. doi: https://doi.org/10.1215/00182702-24-Supplement-77 Download citation file: Zotero Reference Manager EasyBib Bookends Mendeley Papers EndNote RefWorks BibTex toolbar search Search Dropdown Menu toolbar search search input Search input auto suggest filter your search Books & JournalsAll JournalsHistory of Political Economy Search Advanced Search The text of this article is only available as a PDF. Copyright © 1992 by Duke University Press1992 Article PDF first page preview Close Modal You do not currently have access to this content.

Individual preferences, government policy, and COVID-19: A game-theoretic epidemiological analysis

Objective: economic and legal description, formal justification and construction of models of the balanced economic, legal and social macrosystems in order to determine effective strategic decisions under uncertainty.Methods: the theoretical and methodological basis of the study is the synthesis of the provisions and principles of game and management theories, economic and mathematical modeling and the game-theoretical models of decision-making in complex systems developed on their basis, as well as theoretical and methodological approaches of system analysis, economics, sociology, and law.Results: the balance of economic, legal and social systems is determined by the target orientation to the growth of the population’s well-being. The existing mechanisms for achieving this balance do not take into account the interests of all participants of the systems. The paper presents a structural analysis of the interaction and mutual influence of economic, legal and social macrosystems (a complex metasystem); the necessity of transforming the existing approaches to their regulation is shown. The problem of ensuring the systems’ balancing is largely related to the conflict of interests of the parties. Therefore, traditional methods of modeling decision-making processes do not reflect the real socio-economic processes. This problem was solved through game-theory models that contribute to the implementation of the constitutionally established norms which define Russia as a social state. When making strategic decisions in the social sphere, it is proposed to use the concept of the Golden rule of morality as the main economic doctrine, instead of the currently used neoliberal approach, based, among other things, on the concept of Nash equilibrium. The equilibrium models of the complex metasystem by Nash and Berge were formalized, constructed and compared.Scientific novelty: in contrast to the Nash equilibrium (principles of rationality) - the traditional approach used in the construction of equilibrium models, - the paper offers a theoretical justification of the development and construction of equilibrium models and balance sheet equilibrium of economic, legal and social macrosystems by Berge, as well as a formalization of effective strategic decisions and their respective risks.A distinctive feature of the constructed macromodels is the use of the philosophical and moral concept of the Golden rule (the mathematical basis is the balance by Berge) as an economic doctrine for strategic decision-making under uncertainty, and the construction of the so-called guaranteed optimal solutions by Pareto (effective), based, among other things, on the concept of the pair “social guarantee - life risk”. If, in real conditions, one of the macrosystems is economic and is a “generator” of uncertainties, a guaranteed solution is formalized, optimal by Slater (weakly effective).Practical significance: the developed methodology for building the system equilibrium of economic, legal and social macro-systems enables to make decisions socially significant for the population that adequately take into account the peculiarities of the modern socio-economic macro-systems, such as nonstationarity, dysfunctionality, incomplete information, inconsistency, conflict, alternatives, multicriterial character, and risk; and to develop assisting intellectual systems of supporting decision-making based on mathematical models built using the game-theory approach.

The most relevant figure associated with game theory is, without any doubt, John von Neumann, the Hungarian-American mathematician—one of the greatest of the twentieth century. Although others preceded him in formulating concepts connected to game theory (notably Emile Borel), it was von Neumann who in 1928 published the paper that laid the foundation for the theory of two-person zero-sum games. His work culminated in an essential book on game theory written in collaboration with Oskar Morgenstern and titled Theory of Games and Economic Behavior (1944).

There is a tendency for some economists who are less familiar with game theory (GT) to comment that it has never fulfilled its early promise and that it essentially has little to offer as a tool to understand, predict and guide human, social and economic behaviour. For instance in Sylvia Nasar’s book ‘A Beautiful Mind’, she recounts the remarkable controversy that surrounded the award of a nobel prize for GT, including one committee member apparently asking for ‘a single major example that game theory had any empirical validity whatsoever’ (p. 371). An excellent reply to such sceptics would be to present them with a copy of Colin Camerer’s new book, ‘Behavioral Game Theory’. This is not to say that his book catalogues an unbroken string of successes for the theory, as we shall see neither GT nor human behaviour emerges unscathed from the body of work reported therein.

Financial incentives to poor countries promote net emissions reductions in multilateral climate agreements

Social memory, social stress, and economic behaviors

The author presents the contemporary age as one in which young people is affected by a sort of nihilism.Nihilism, the negation of any and all values, was described by Nietzsche as "the most disturbing of all guests".Science and technology today have lost their social significance and are unable to provide any truth or certainty.The concepts of individual identity and freedom, as well as those of nature, ethics, politics, religion and history, no longer give meaning to life.This brief essay argues that in Italy the situation has been exacerbated by the social-psychological phenomena occurring between 1994 and 2011, when Silvio Berlusconi was the dominant force in Italian politics.An important issue from a psychological standpoint, but also in social, philosophical and ethical terms, is the development of moral sense in young people, and it is precisely in this field that the most serious consequences of neo-nihilism are seen.An understanding of the mechanisms of moral development in today's society can thus provide insight into the pathological aspects of young people's behaviour and the factors affecting it.The formation of ethical values in the younger generation is also affected by the economic crisis and by the consequent lack of social and economic independence of young people.Understanding how ethical values are formed may shed some light on the role of youth in terms of their interaction with society and on the educational and moral criteria that enable healthy values to be inculcated.

As far as recent developments in economic theory are concerned, "Behavioral Economics" constitutes one of the most promising frontiers in the last ten years, as the Nobel Prize for Economics recently won by the social psychologist Daniel Kahneman and the prestigious John Bates Clark Medal granted to the young economist Matthew Rabin testify. It is then worth asking the following questions: what is, exactly, Behavioral Economics? What are the reasons behind its recent success? This survey aims at providing a first answer, both directly and indirectly, to such questions, by illustrating the main contributions developed within such ambitious research program. Behavioral Economics aims at increasing the explanatory and predictive power of economic analysis through an increase in the degree of realism of the assumptions at the basis of economic models, i.e. by means of a greater and greater integration between economics and psychology (but also between economics and social sciences such as, for example, cultural anthropology). While standard economics assumes that agents are driven by well-defined and stable preferences and act rationally, psychology reveals that it is often the case that such assumptions cannot be taken as an adequate and satisfactory description of human behavior. In this light, Behavioral Economics focuses on markets where some (if not all) economic agents involved make choices which appear to substantially deviate from traditional economic predictions. In this survey we focus on the following two fields of studies within Behavioral Economics: a first field deals with the main cognitive limitations affecting economic behavior (Sections 2 and 3), whereas a second one is related to the role of the so called "social preferences" (Section 4). Both areas aim at incorporating the major results obtained both experimentally and empirically into formal economic analysis. Within the first area, it is assumed, analogously to neoclassical models, that agents act according to the self-interest hypothesis, but also that "rational" behavior is affected by several cognitive limitations (in line with classical contributions on bounded rationality; see, in particular, Simon 1978; 1979; 1992). By contrast, the second area departs from the neoclassical approach by introducing modifications at motivational level. Unlike traditional analyses, social preferences studies focus, at both theoretical and experimental level, on interaction scenarios where players act not on classic selfish preferences but on different types of social preferences. In other words, it is still assumed that individual behavior is rational, but also that various forms of non-selfish rationality get into the picture. In particular, behavioral choices by individual agents (as well as their objective functions) can be (either positively or negatively) affected by "other players'" preferences, intentions, material outcomes and/or behaviors.

According to game theory, a human subject playing the ultimatum game should choose more for oneself and offer the least amount possible for co-players (assumption of selfish rationality) (Rubinstein in J Econ Behav Organ 3(4):367–388, [1]). However, economy, sociology and neurology communities repeatedly claim non-rationality of the human behaviour (Werner et al. in Theory of Games and Economic Behavior. Princeton University Press, Princeton, [2]), following the observation that responders reject offers they find too low and proposers often offer more than the smallest amount, thus suggesting that humans’ behaviour is significantly influenced by social norms. We also assume human rationality, but our model describes a human responder via decision process with a reward function respecting fairness as much as the economic profit. This model is positively tested against a set of original experimental data, thus providing an insight into human’s motivation as a social being.

The general area of ‘cooperative games’ has been under attention as a topic for game theoretical studies since the publication of von Neumann and Morgenstern’s Theory of Games and Economic Behavior (1944). However, it has been an area of difficulties as well as of some creative ideas.KeywordsCooperative GameRepeated GameBargaining ProblemModeling CoalitionCharacteristic FuncThese keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.