Developmental game theory and decision-making

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This project will advance the understanding of the development of strategic decision-making in children and adolescents by assessing the contribution of logical and strategic thinking to decision-making abilities. Strategic thinking is critical to make everyday decisions and such decisions often involve other players who have different motivations and perspectives. These differences must be understood at the time of decision to make logical and informed decisions. Research has shown that adults have innate abilities to coordinate on efficient market outcomes even with very limited knowledge. At the same time, they have limited abilities to anticipate what others may do and to strategize in a large variety of multi-person situations, such as bargaining. This suggests that some abilities develop while others do not. An important objective of the project is to study how children develop (or do not develop) these abilities and to better understand the reasons for irrational choices in adults. Also, the project will allow to better assess the limitations in the acquisition and transfer of cognitive skills to decision-making. This will help determine whether cognitive skills and rational behavior can be enhanced. Last, the study may help explore new curriculum development strategies and inform interventions around children and teenagers. Indeed, one essential role of education is to promote critical thinking. Education is thus expected to impact positively the way we make decisions. Our study will contribute to the design of an educational environment capable of promoting success beyond school-related attainment. The study will feature four sets of lab-in-the field experiments. School-age students from Pre-K to 12th grade will be recruited from public and private schools in the Los Angeles area. For comparison, adult controls will also be recruited. Each experiment will evaluate the performance of each participant on tasks designed to assess cognitive traits and on game theoretic paradigms that require those underlying cognitive traits. Four game theoretic paradigms in which adults comply differentially with equilibrium predictions will be studied. The first experiment will investigate how humans develop their innate ability to coordinate on efficient solutions in repeated relationships. The second experiment will explore strategic situations in which adults are largely heterogeneous in their ability to anticipate what others will do and to formulate a best response. The third experiment will explore the underlying causes that make mixed strategy behavior non-intuitive and difficult to implement. The last experiment will investigate the reasons why the ability to strategize does not develop naturally in the presence of informational asymmetries. The study will allow to identify behavioral biases that develop gradually. Tracking biases to their developmental causes is important to inform research in Economics and to develop theoretical models with better predictive power. At the same time, the study will offer clues that may be used to remedy such biases. The study will help assess whether limitations of strategic thinking abilities stem from an imperfect acquisition of cognitive skills, which may be remedied by exposing children to specific problems and teaching them how to think about them.This award reflects NSF's statutory mission and has been deemed worthy of support through evaluation using the Foundation's intellectual merit and broader impacts review criteria.