Behavioral Game Theory

What is behavioral game theory?

Behavioral game theory uses evidence from psychology and experiments to study strategic decisions: choices whose results depend on what other people do. It examines limited strategic reasoning, learning, and social preferences.

Game theory can represent preferences beyond personal monetary gain. The behavioral question is which assumptions predict the choices people actually make. Camerer’s review develops these connections between strategic thinking, learning, and social preferences.

Examples of behavioral game theory

Ultimatum game

In the ultimatum game, one player proposes how to divide money. The other can accept, giving both their proposed shares, or reject, giving both nothing. Under one-shot play, monetary self-interest, and the relevant assumptions about what each player knows, a standard equilibrium predicts a minimal positive offer that is accepted. Fairness concerns can instead lead people to offer more or reject an offer they regard as unfair.

Dictator game

In the dictator game, the recipient cannot reject the allocation. Someone who values only their own payment would keep it all. Sharing can reflect social preferences; it does not automatically violate rationality.

Coordination game

A coordination game concerns situations where people benefit from matching their choices. The challenge includes anticipating what the other person will choose.

Limitations and interpretation

The rules matter. So do the stakes, anonymity, participants, and social context. A pattern in one experiment is not automatically a prediction about a workplace negotiation or political dispute.

Calling an unexpected choice irrational can conceal the real question: what did the player value, believe, and understand? Learning is part of behavioral game theory too. A useful model should make testable predictions and be checked against new observations, rather than merely offer a psychological explanation after the result is known.