Figure 1.
In this extensive form game players 1 and 2 can, by alternating moves, end up at the outcome (50, 50). However, player 1 has an incentive to play left at decision node x3, ending the game at (60, 30). Given this incentive, noncooperative game theory predicts player 2 will play right at x2 and end up at the outcome (40, 40). The theory-of-mind hypothesis discussed in this paper predicts that player 1 will infer from player 2's move left at x2 that player 2 is trying to reach the mutually beneficial (50, 50) on the left. From this informed inference about player 2's intentions, player 1 will move down at x3.