Solution of Traveler’s Dilemma

Aim: The aim of the article is to show: 1) that the reasoning of perfectly rational players presented in 1994 by the author of the Traveler's Dilemma Kaushik Basu is incorrect and therefore leads to wrong conclusions, 2) how the reasoning of these players should look like and what solution it leads to. Design / Research methods: Logical analysis. Conclusions / findings: Perfectly rational Traveler’s Dilemma players should use, according to game theory, so-called retrograde (iterative) induction. This is wrong, as in the set of Traveler’s Dilemma games results the principle of transitivity is not met. We believe that perfectly rational players will achieve a better result when they make a random decision from a suitably limited set of decisions. After applying this method of decision making, perfectly rational players will achieve a result similar to those obtained by real players in experiments. Thus, the paradox described in the theory of games disappears, that perfectly rational players achieve worse results than real players Originality / value of the article: A new way of making decisions in the Traveler’s Dilemma game. Implications of the research: A new way of making decisions in other games similar to the Traveler’s Dilemma may allow to find new solutions in these games. Limitations of the research: The described decision-making method can potentially be used in decision-making situations when the following five conditions are met: 1) the set of possible decisions of each player is greater than 2, 2) the winning matrix is known to both players and both know the purpose of their choices, 3) when it is played once with an unknown opponent, 4) when both players have to make their decision without knowing the opponent's choice, 5) when there is no decision, which is a stable balance point or when it is, but its choice means that the player does not achieve a satisfying result.

On Rationality in The Traveler’s Dilemma

Kaushik Basu presents the Traveler’s Dilemma (TD) as a challenge to Game Theory. This challenge has been experimentally investigated. When faced with Basu’s version of the TD, participants (including experts in game theory) behave inthe way Basu suggests. However, a little change in the game turns out to reverse participants’ choices. The question is, then, whether it is possible to provide an account of the main empirical findings as consequences of rational choices (i.e., torationalize them). There are several proposals in the literature but none of them provides a satisfactory account for why experts in game theory playing against each other usually reject the only undominated option of the TD. The goal of this article is to suggest an alternative proposal that fixes this problem.

Social preferences are not enough: Accounting for anomalous behavior in a complex mixed-motive game

In some economic games, participants systematically display behavior that departs from the model of payoff maximization, and this is usually attributed to social preferences. In this paper we focus on a new interactive context, a mixed-motive game called "Alternative Traveler's Dilemma" (ATD). In this context, most participants choose strictly dominated strategies. Preliminary studies suggest the reason for such a tendency is that participants have social preferences, usually competitive in nature. The question is whether some cognitive factors should also be included in models that account for the tendency at stake. More specifically, we investigate whether participants neglect payoff maximization, that is, whether they fail to notice that, by pursuing some competitive goal, they are not maximizing their payoffs. We report the results of an experiment that supports this hypothesis. We conclude that in order to explain anomalous behavior in the ATD, and similar games, we need to study the cognitive factors that bound participants' strategies and understanding of the game.