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Fairness and Trust in Game Theory

In order to apply game theory to interactions among people, one needs to know what game people are playing, and to know what game people are playing, one needs to know their preferences. If the individuals care only about their own material payoff, it may be easy to know their preferences. But other things matter to people, and to apply or test game theory, some account of what those other things are and how they matter may be needed. This essay examines the dependence of utility on material self-interest, altruism, concerns about fairness, and concerns about trust. It begins with Matthew Rabin's proposal for incorporating fairness into game theory (1993), points out inadequacies, and sketches remedies. The complexities that arise in even the simplest two-person interactions are daunting.