Gram_Stone comments on Agent-Simulates-Predictor Variant of the Prisoner's Dilemma - Less Wrong Discussion
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I'm not sure it's really more counterintuitive that (known) ability to predict can be a disadvantage than it is that (known) having more options can be a disadvantage.
In this case, predictability is an advantage because it allows you to make binding commitments; in other words, to visibly eliminate options that would otherwise be available to you. And (see, e.g., Schelling) the ability to visibly eliminate some of your own options is very often valuable, because those options might be ones whose possibility gives the other player reason to do something that would be bad for you.
In this case, A's predictability effectively takes the possibility that A might cooperate out of the picture for B, which means that B no longer has reason to defect.
(The examples in Schelling, IIRC, tend to be of an opposite kind, more like the PD, where the ability to assure the other player that you won't defect is advantageous for both parties.)
I wonder if it might be fruitful to think generally about decision theories in terms of their ability to rule out suboptimal decisions, as opposed to their ability to select the optimal decision.
I also wanted you to read something I wrote below:
Also, there are variants with imperfect predictors: