CHAPTER 1: INTRODUCTION TO STRATEGIC REASONING

Grace’s Provider Lisa’s Provider Grace’s Utility

AT&T AT&T 10

AT&T Verizon 5

AT&T Sprint 5

Verizon AT&T 3

Verizon Verizon 8

Verizon Sprint 3

Sprint AT&T 2

Sprint Verizon 2

Sprint Sprint 6

12 CHAPTER 1: INTRODUCTION TO STRATEGIC REASONING

that is relevant to game theory: a person’s capacity to form beliefs as to what others will do. While we’ll assume that people are endowed with preferences, such as those described in Table 1.4, they are not endowed with beliefs. Indeed, a major function of game theory is to derive reasonable beliefs re- garding what other players will do.

There are two processes from which these beliefs might emerge, one smart and one dumb. The dumb process is simply experience, which is referred to as experiential learning. By interacting again and again, a person comes to expect—rightly or wrongly—that another person will do what he’s done in the past. This process has great universality, as it can be practiced by small kids and many species in the animal kingdom.

The smart process for forming beliefs is called simulated introspection. Introspection is the examination of one’s own thoughts and feelings, while in simulated introspection a person is simulating the introspective process of someone else in order to figure out what that individual will do. Simulated in- trospection is the default method of belief derivation in this book, although some of what we’ll say can be derived through experiential learning. Because simulated introspection is subtle and complex, let’s discuss what demands it puts on a person.

To have the capacity to simulate the reasoning of others, a person must have self-awareness, which means being aware of your own existence. It is not enough to think; a person must be capable of thinking about thinking. Thinking is, then not just a process, like digestion, but also a mental state. Of course, thinking about how you think doesn’t necessarily get you closer to fig- uring out what someone else is thinking; we also need what psychologists call a theory-of-mind mechanism (ToMM). Possession of a ToMM means that you attribute thinking to others and attribute a ToMM to others, which means that you attribute to them the possibility of thinking about you thinking, just as you can think about them thinking. A ToMM is essential to strategizing and is what produces the endlessly slippery slope of infinite regress.

A ToMM is a fascinating capacity and is the basis for all that underlies this book. It has been argued that a ToMM is so useful for social animals that it is natural to think of it as the product of evolution. Surviving and thriving in a community would surely have been enhanced by being able to predict what others would do.3 Given the advantage that a ToMM bestows, it is natural to ask whether other primates possess it. Although indirect tests have been con- ducted on apes and chimpanzees, the evidence is mixed. Interestingly, some scientists believe that the absence of a ToMM is a feature of autism, in which case it is possible to be an intelligent human, yet lack a ToMM.