Team Reasoning and a Rank-Based Function of Team's Interests

Orthodox game theory is sometimes criticized for its failure to single out intuitively compelling solutions in certain types of interpersonal interactions. The theory of team reasoning provides a resolution in some such cases by suggesting a shift in decision-makers’ mode of reasoning from individualistic to reasoning as members of a team. The existing literature in this field discusses a number of properties for a formalized representation of team’s interests to satisfy: Pareto efficiency, successful coordination of individuals’ actions and the notion of mutual advantage among the members of a team. For an explicit function of team’s goals a reference is sometimes made to the maximization of the average of individuals’ personal payoffs, which meets the Pareto efficiency and (in many cases) coordination criteria, but at times fails with respect to the notion of mutual advantage. It also relies on making interpersonal comparisons of payoffs which goes beyond the standard assumptions of the expected utility theory that make numerical representations of individuals’ preferences possible. In this paper we propose an alternative, rank-based function of team’s interests that does not rely on interpersonal comparisons of payoffs, incorporates the notion of mutual advantage and satisfies the weak Pareto efficiency and (in many cases) coordination criteria. We discuss its predictions using a number of examples and suggest a few possibilities for further research in this field