Social dilemmas: what if not everybody knows that everybody knows that everybody is rational?

Abstract

In this paper social dilemmas are modelled as two-player games. In particular we model the Prisoner’s Dilemma, Chicken and Stag Hunt. When modelling these games we assume that players adapt their behaviour according to their experience and look for outcomes that have proved to be satisfactory in the past. These ideas are investigated by conducting several experiments with an agent-based simulation model in which agents use a simple form of case-based reasoning. It is shown that cooperation can emerge from the interaction of selfish case-based reasoners. In determining how often cooperation occurs, not only what Agents end up doing in any given situation is important, but also the process of learning what to do can crucially influence the final outcome. Agents’ aspiration thresholds play an important role in that learning process. It is also found that case-based reasoners find it easier to cooperate in Chicken than in the Prisoner’s Dilemma and Stag Hunt.