Joint Reasoning in Social and Economic Interaction: A Virtual Bargaining Approach

Economics

Speaker:Nick Chater, University of Warwick
Date: Wednesday 12 October 2016
Time: 13.30
Location: Streatham Court B

Further details

Successful social and economic interaction involves coordinating thoughts and behaviour between people. But how such coordination achieved? If each person attempts to second-guess the thoughts and behaviour of the other, there is a danger of an infinite regress. A tries to infer what B will do; and knows that B will try to infer what A will do; so A needs to figure out what B thinks that A will do; but what A will do in turn depends on what B thinks A thinks that B will do, and so on, forever. We introduce a different approach: that people can reason jointly about what they would agree to think or do, were they able to negotiate. That is, they reason not about “What will you do?” and “What should I do?, but rather “What should we agree to do?” Where it is “obvious” what a resultant such negotiation would be, no actual communication is required: we can coordinate our thoughts and actions through a simulation of the bargaining process. Virtual bargaining provides a new foundation for understanding the reasoning that underpins social behaviour, including communication itself, and provides a generalization of standard game theory.