SSE/EFI Working Paper Series in Economics and Finance
Evolution of Theories of Mind
Abstract: This paper studies the evolution of peoples' models of how
other people think -- their theories of mind. First, this is formalized
within the level-k model, which postulates a hierarchy of types, such that
type k plays a k times iterated best response to the uniform distribution.
It is found that, under plausible conditions, lower types co-exist with
higher types. The results are extended to a model of learning, in which
type k plays a k times iterated best response the average of past play. The
results are also extended to the cognitive hierarchy model, and to the
introduction of a type that plays a Nash equilibrium.
Keywords: Theory of Mind; Evolution; Learning; Level-k; Fictitious Play; Cognitive Hierarchy; (follow links to similar papers)
JEL-Codes: C73; D83; (follow links to similar papers)
53 pages, May 4, 2010, Revised March 20, 2012
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