Experimental Game Theory - Philosophical Concept | Alexandria
Experimental Game Theory is a branch of game theory that tests theoretical predictions and explores human behavior in strategic situations through controlled experiments. It's more than just abstract mathematics; it delves into how real people actually act when faced with choices involving interdependence. Sometimes called behavioral game theory, it challenges classical game theory's assumption of perfect rationality, subtly questioning whether we truly behave as predictably as models suggest.
The seeds of experimental game theory were sown in the mid-20th century. One can trace its roots back to the 1950s, when mathematicians like Merrill Flood and Melvin Dresher, while at the RAND Corporation, conducted the first experiments on the Prisoner's Dilemma, a game designed to explore cooperation and defection. These early experiments revealed that individuals often deviated from the purely self-interested strategies predicted by traditional game theory. This era, marked by the Cold War's anxieties, perhaps heightened the urgency to understand strategic decision-making, hinting at a deeper understanding of human behavior that game theory could potentially unlock.
As the field matured, economists began to incorporate experimental methods more rigorously. Vernon Smith’s work, starting in the 1960s, demonstrated the power of experiments to illuminate market behavior. Later, Reinhard Selten's work on bounded rationality showed that people simplify complex problems, and Daniel Kahneman and Amos Tversky's insights into cognitive biases further eroded the assumption of perfect rationality. A peculiar observation throughout these studies is humans rarely reach Nash equilibrium in one-shot games, but tend to approach theoretical predictions over repeated trials. Could this mean humans have the potential for perfect rationality, but it takes time?
Today, experimental game theory continues to shape our understanding of economics, political science, psychology, and even biology. Its findings have implications for designing institutions, understanding social norms, and predicting responses to policy changes. The continuing mystique of experimental game theory lies in its ability to bridge the gap between abstract theory and real-world behavior, challenging us to question whether our assumptions about human rationality hold true. Do games truly reflect our world, or do they merely reflect how we perceive these interactions?