Beliefs, Actions, and Rationality in Strategical Decisions

Abstract

A puzzling finding from research on strategical decision making concerns the effect that predictions have on future actions. Simply stating a prediction about an opponent changes the total probability (pooled over predictions) of a player taking a future action compared to not stating any prediction. This is called an interference effect. We first review five different findings of interference effects from past empirical work using the prisoner's dilemma game. Then we report interference effects obtained from a new experiment in which 493 participants played a six-stage centipede game against a computer agent. During the first stage of the game, the total probability following prediction for cooperation was higher than making a decision alone; during later stages, the total probability following prediction for cooperation was lower than making a decision alone. These interference effects are difficult to explain using traditional economic models, and instead these results suggest turning to a quantum cognition approach to strategic decision making. Toward this end, we develop a belief-action entanglement model that provides a good account of the empirical results.

Keywords: Belief assessment; Centipede game; Disjunction effect; Interference effects; Prisoner's dilemma game; Quantum cognition; Rationality; Strategical decisions.