The outcomes from strategic decision-making (such as market entry or technology adoption) depend on structural features of situations and types of players involved. Even in identical situations, players differ in their perceptions of situations, goals, and strategic sophistication. Informed by behavioral and experimental economics, we present two heuristic player types under strategic uncertainty in new situations, exemplified within the simplest class of games, two players-two actions (2x2) games, e.g. Prisoner's dilemma or Entry games. One type anticipates others' behavior and (iteratively best replies) to his or her beliefs (called iterated reasoning heuristics or level-k). The other type is guided by goals of own payoff maximum, equality, or social optimum, ignoring procedural details such as others' reasoning, subsumed under efficiency heuristics. New to the literature, to understand the implications of the structure of games and player types, we develop a behavioral taxonomy of 2x2 games. Given the fundamental differences of the two types, the large set of 2x2 games collapses to four distinct classes for efficiency types and fine, albeit different ones, for iterated reasoning, and 14 in a joint system. We critically discuss some results from the experimental economics and neuroeconomic literature of eye-tracking and fMRI data and propose new experiments in the light of our behavioral player types and structure of 2x2-games. The behavioral economics part of the talk is based on the paper "Iterated Reasoning and Efficiency Heuristics, and a Behavioral Taxonomy of 2x2 Games" by Rosemarie Nagel, Jens Schmidt, and Davide Marchiori.
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