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Theory of Mind and Strategic Decision-Making

Neha Bose and Daniel Sgroi
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Neha Bose: University of Warwick

CAGE Online Working Paper Series from Competitive Advantage in the Global Economy (CAGE)

Abstract: In a laboratory experiment, 338 participants were asked to communicate in pairs and then play two games with their partners: the 11-20 money request game (a tool for assessing level-k reasoning) and a public goods game. The communication occurred prior to any knowledge of what was to follow but played an important rolein allowing them to develop theories or mental models of their partners (“theory of mind”) which proved to be crucial explanatory factors for decision-making. We examine the players’ beliefs about the personality and intelligence of their partner, how they play in the games and analysed the language used during communication. The results indicate that beliefs about partner’s type is biased by own-type. In particular, extraverts, characterised by positive affect, projected their positivity onto their partners. The level-k strategy chosen in the 11-20 game increased with the perceived similarity between players and in the public goods game, players cooperated more when they believed their partners to be extraverted. An analysis of the text used during communication explains how it was possible for participants to draw inferences about other’s type: for instance, use of more words and more dominant words were associated with being an extravert.

Keywords: theory of mind; cheap talk; communication; level-k reasoning; public goods game; cooperation; extraversion; perceived similarity; self-projection bias; laboratory experiment; text analysis. JEL Classification: D91; D83; C92. (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cbe, nep-exp, nep-gth and nep-neu
Date: 2019
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