BoundedRationality_TheAdaptiveToolbox.pdf

324 Kevin A. McCabe and Vernon L. Smith
(9t 12 . 9t 21 . x 1 .x2)
1 *
[0,0+V(gt 12 +a)] [0, 0+V(gt 12 -p)]
[20+V(gt 21 +oc), 20]
[20+V(g 2 i-B), 20]
[30+V(gt 21 +a), 10]
[30+V(gt 21 -p),10]
Figure 18.3 Goodwill accounting in basic punishment game. Goodwill accounting
strategies are shown with dotted arrows.
lower player 1' s goodwill, but this means less trading opportunities in the future.
Alternatively, player 2 can move down and punish, giving both players an immediate
payoff of zero. Under this option, player 2 does not decrement player
1' s goodwill, gt l 2 - P, but instead expects player 1 to increment player 2' s goodwill,
gt 21 + a, thus bringing it more in line with player 2's goodwill assessment
of player 1. This second option has two effects: (a) it makes both players better
trading partners in the future, and (b) if player 1 anticipates that player 2 will
punish for this reason, then player 1 is less likely to defect. In fact, punishment at
time t followed by a renewed effort to cooperate at time t +1 is a common strategy
(reported by McCabe and Smith 1999) in the punishment version of the
games we have studied with the same partners matched in each trial.
HOW DOES THE MIND SOLVE THE PROBLEM OF
EXCHANGE?
Clearly, a subject who, acting as player 1, moves down, must have a strong belief
that player 2 will reciprocate (at least two-thirds of the time.) Noncooperative
game theory cannot explain where these beliefs come from, but evolutionary
psychology offers an explanation (see Hoffman et al. 1998). According to evolutionary
psychologists, the mind is a complex organization of specialized mental
algorithms, each designed by natural selection to solve a specific problem of
reproductive success. We hypothesize that such a system of mental modules exists
for solving the problem of personal exchange.
Figure 18.4 describes the mental modules that we hypothesize are used by
the mind to reason about the riskiness of exchange. At the core of our cognitive