Inductive game theory: a basic scenario (Q2519062)

While in parlour games the rules are clearly described, in some social and economic situations the rules are not as clearly specified, and players need other sources for their beliefs or knowledge. In this paper the authors attempt to develop a theory about the emergence of beliefs and knowledge based on the individual experiences of players with bounded cognitive knowledge. This theory formalizes part of an inductive process of a decision maker--how such a person might use his experiences to form an hypothesis about the rules and structure of the game. The theory has three main stages: the experimental stage, in which the player accumulates experiences by choosing his regular behavior and occasionally some alternatives; the inductive stage, in which he constructs a view of the game based on the accumulated experiences; and the analysis stage, in which he uses his derived view to analyze and optimize his behavior. Upon successfully passing through these three stages, he brings his optimizing behavior to the objective situation in the form of a strategy.