Cognitive Hierarchy Process Models of Strategic Thinking in Games

This chapter discusses specialized models of the cognitive processes involved in strategic thinking. It describes strategic thinking by the choice of strategies in mathematical games. Game theory specifies how players choose high‐value strategies by guessing the likely choices of other players and acting on these guesses. Realistically, players may fail to correctly guess what others will do. This naturally limited thinking process is the main focus of this chapter. The chapter talks about one part of behavioral game theory: a cognitive hierarchy (CH) model of the limits on what players infer what other players will do. It also presents some motivating empirical examples of the wide scope of games to which the theory has been applied with some success, including field data, and consistency with data on functional magnetic resonance imaging (fMRI) and visual fixations measured using both Mouselab and eye tracking.