Functional Dynamics by Intention Recognition in Iterated Games

Intention recognition is an important characteristic of intelligent agents. In their interactions with others, they try to read others' intentions and make an image of others to choose their actions accordingly. While the way in which players choose their actions depending on such intentions has been investigated in game theory, how dynamic changes in intentions by mutually reading others' intentions are incorporated into game theory has not been explored. We present a novel formulation of game theory in which players read others' intentions and change their own through an iterated game. Here, intention is given as a function of the other's action and the own action to be taken accordingly as the dependent variable, while the mutual recognition of intention is represented as the functional dynamics. It is shown that a player suffers no disadvantage when he/she recognizes the other's intention, whereas the functional dynamics reach equilibria in which both players' intentions are optimized. These cover a classical Nash and Stackelberg equilibria but we extend them in this study: Novel equilibria exist depending on the degree of mutual recognition. Moreover, the degree to which each player recognizes the other can also differ. This formulation is applied to resource competition, duopoly, and prisoner's dilemma games. For example, in the resource competition game with player-dependent capacity on gaining the resource, the superior player's recognition leads to the exploitation of the other, while the inferior player's recognition leads to cooperation through which both players' payoffs increase.