Advanced Social Theory Clips

1.
1 Coleman diagram
- Sociological questions are questions about relations between macro-conditions to macro-outcomes
-Why does panic occur in a crowded room if the fire alarm goes off?
-Why do revolutions mostly occur when
economic conditions are improving?
- Explanations should go beyond common-sense claims
directly on the macro relation; they should make
understandable how macro-conditions affect individual
behavior and how behavioral reactions of many lead
back to the macro-outcome.
Bridge assumptions are assumptions on how the social

conditions have an effect on the individual goals.
A thinking framework for sociological problems

- To ensure that arguments on bridge assumptions,
transformation rules, and the individual level theory
are made explicit
- Much more than a causal scheme: arguments on bridge assumptions and transformation rules can imply
feedback loops and other more complex causal relations, because, e.g., individual behavior of one person
can change macro-conditions for another person
- To explicate some of these more complex mechanisms sometimes “Coleman-fleets” are used to make that
explicit
Game Theory: Key Concepts

Game theory
Theory of goal-directed behavior in interdependent decision situations
• Interdependent: The outcomes for one actor depend not only on his/her own actions, but also on the
actions of another actor
Game theory studies strategic behavior, they try to optimize their outcome.
Examples of interdependent situations

• Changing lanes in traffic jams
• Joining a demonstration, you feel good as many people come
• Bidding in negotiations
• (and games, too, e.g. rock, paper, scissors)
An intuitive characterization of 'goal-directed' action

Actors have:
• Alternative actions, you have to have a choice
• Goals, i.e., evaluations of the possible outcomes of actions
• Expectations (or information) on the “states of the world” (for example, expectations on certain
“contingencies” or on the behavior of other actors).
Actors choose:
• the action that seems most appropriate, given their expectations, to realize their goals.
What is a game?
• Actors
• Moves / Behavior
• Outcomes depending on moves of all actors
• Rules of the game(who has to move first,…)
• Strategies (behavioral plans)
Truster has to choose between placing trust or not on the trustee. If he doesn’t trust, the game is done. If he
trust and the trustee honors the trust they both have more.

Best-Reply Strategy
• Consider a noncooperative(no talk) game between two players A and B.
• Let X be a strategy of actor A and let Y be a strategy of actor B.
• X is a best reply strategy of player A against strategy Y of player B if X maximizes A’s payoff against Y.
Note: Using strategy X against Y is consistent with goal-directed behavior of A, given that A anticipates B to
use Y.
Dominant strategy
• X is a dominant strategy of player A if X is player A’s unique best reply against all strategies of player B.
Note: Goal-directed behavior implies that a player uses a dominant strategy.
Note: A player has at most one dominant strategy and often he or she has none.
Nash equilibrium
• A strategy combination (X, Y) is a Nash equilibrium if X is a best reply strategy of player A against Y and
Y is a best reply strategy of player B against X.
Note: Nash has shown that every “finite game” has at least one equilibrium, possibly in mixed strategies.
Note: A game often has more than one equilibrium.
Some Implications
• A player chooses a best reply strategy, given his or her anticipation of the strategy chosen by the other
player.
• If a player has a dominant strategy, he or she will use this strategy.
• The chosen strategies will be a Nash equilibrium.
Pareto optimality
• An outcome of strategy combination (X, Y) is Pareto-optimal if there is no other strategy combination
that yields payoffs that are not lower for any player and at least one player earns a higher payoff.
Impossible that both player can be better off in another cell, wanneer niemand zijn positie kan verbeteren
zonder dat dit ten koste gaat van de ander.
• An outcome of strategy combination (X, Y) is Pareto-suboptimal if there is another strategy combination
that yields a higher payoff for at least one player, and no player earns a lower payoff.

Analyzing two by two games
Hoit
t
Repeated Prisoner’s Dilemma

Extension: cooperation in repeated interactions
• Original explanatory problem: why do people cooperate in social dilemmas? (problem of order)
• Theory: (non-repeated) Prisoner’s Dilemma. Prediction: no cooperation
• Observation: people do sometimes cooperate
• Revision of the theory: repeated interaction
• (Other possible revisions: networks, social preferences)
Plan for the analysis

1. Specify the game
2. Figure out the payoffs of the players
3. Find the equilibrium (or equilibria). Under what conditions is mutual cooperation an equilibrium
The repeated
• The Prisoner’s Dilemma is played 10 times. After each round, each player is informed on the other player’s
behavior (C or D) in that round.
• A player’s payoff for the repeated game is the sum of his or her payoffs in each round
Strategies for a repeated game

Players can only choose two strategies
• ALL D (always Defect) eq in enkel pd
• Tit-for-Tat (start with Cooperation and play whatever the other played in the round before)
After this simplification, we can analyze the game as a two-by-two game and derive conditions for
cooperation.

Crucial trade-off
• Short-term gains (T vs R)
• Long-term losses (after the first round always P or always R)
Equilibria
• (ALL D, ALL D) is always an equilibrium because
10 P > S + 9 P
• (ALL D, TFT) and (TFT, ALL D) are never equilibria
How can TFT, TFT become a equilibria?
Main implications
Cooperation is an equilibrium if
• the players play enough games
• the temptation to defect is small enough
• the costs of conflict are high enough
Why is the analysis flawed?

• All possible strategies in the repeated game should be
considered.
• Cooperation is never a best reply in the last round of the
game (finitely repeated game), thus TFT cannot be an
equilibrium strategy in this game.
• Still: under sound game-theoretical assumption, e.g., the game is repeated with a probability 0.9after each
round, you get basically the same results and implications (but using more complex maths).

Public Goods Game (with punishment)

Public Goods Game
• Game representing cooperation problem (as the PD)
• More than 2 players
• Investment (level of cooperation) more continuous (instead of yes/no) bv effort in learning for a test
• Version without and with punishment option
Analysis of the game

• If everyone contributes everything 4*20*1.6 = 128 can be distributed leading to 32 for everyone.
• Every point invested by yourself, leads only to a 0.4 point return for yourself: whatever the others do,
every point invested cost you more than you get in return
-> zero investment is dominant strategy for everyone
• Zero investment by everyone is the unique Nash equilibrium (tragedy of the commons)
• During experiments, subjects often invest in early rounds, but this becomes less throughout the game bc
they see that others don’t invest a lot
• Starting at the end of the game: punishment is costly and does not provide any benefits, so no one is
expected to punish in the one-shot Public Goods Game.
• Zero investment by everyone Nash equilibrium and no one punishing after that is still a Nash equilibrium
(tragedy of the commons) and the only Nash equilibrium that takes into account that when arriving at the
punishment stage, not punishing is what a rational, selfish player should do
• Still there are other Nash-equilibria that do neglect the order of moves
• Also as we see in the experiment by Fehr and Gächter: with punishment cooperation is sustained in the
repeated game

Including non-standard preferences in two-by-two games

Utility
• Utility of a certain outcome for a player is the total value a player assigns to a certain outcome, bv they
also want that the other player is happy
• The payoff is the number of points (money) a player earns in a certain outcome
• If players only care about their own payoff, utility and payoff is basically the same
• If players also care in some way about the other player’s payoff, utility is different and to analyze a game
the effective utilities need to be calculated before the game can be analyzed
Altruistic preferences
• Utility of a player does not only involve his or her own payoff, but the payoff
of the other player also adds to the payoff
• Lets assume players value the points of the other player half as
much as their own points
• So, e.g., if the focal player earns 10 points in a certain outcome and
the other player 6 points, then the total utility of that outcome for that player is
10 + 0.5*6 = 13
• In this way we can recalculate the whole payoff
matrix into the effective utility matrix
• Hidden assumption: players know each other’s
preferences, anders niet kunnen berekenen
Implications
• The larger altruism (a), the more likely that mutual
cooperation becomes an equilibrium in the PD
• The larger the temptation to defect, compared to the
gains of cooperation, the larger altruism needs to be
before cooperation becomes an equilibrium
Inequality aversion (Fehr-Schmidt preferences)

• Substantively: utility = payoff – “envy” – “guilt”, disliking if someone
got more or less than themself
• Utility is
• Own outcome MINUS
• α * amount the focal player earns less than the other
(if anything) MINUS
• β * amount the focal player earns more than the
other (if anything)
•Example
• Outcome is (10, 6) for player 1 and 2, respectively
• α = 0.5 and β = 0.25, it is worse to urn less than
more
• Utilities are (10 – 0 – 0.25*4, 6 – 0.5*4 – 0) = (9, 4)
• Application to Chicken Game with
α = 0.5 and β = 0.25

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1.

Bridge assumptions are assumptions on how the social

A thinking framework for sociological problems

Game Theory: Key Concepts

Examples of interdependent situations

An intuitive characterization of 'goal-directed' action

Analyzing two by two games

Repeated Prisoner’s Dilemma

Plan for the analysis

Strategies for a repeated game

Why is the analysis flawed?

Public Goods Game (with punishment)

Analysis of the game

Including non-standard preferences in two-by-two games

Inequality aversion (Fehr-Schmidt preferences)

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