What Situation Is This? Shared Frames and Collective Performance

We study agents who distill the complex world around them using cognitive frames. We assume that agents share the same frame and analyze how the frame affects their collective performance. In one-shot and repeated interactions, the frame causes agents to be either better or worse off than if they could perceive the environment in full detail: it creates a fog of cooperation or a fog of conflict. In repeated interactions, the frame is as important as agents' patience in determining the outcome: for a fixed discount factor, when all agents choose what they perceive as their best play, there remain significant performance differences induced by different frames. A low-performing team conducting a site visit to observe a high-performing team will be mystified, sometimes observing different actions than they expected or being given unexpected reasons for the actions they expected. Finally, we distinguish between incremental versus radical changes in frames and we develop a model of category formation to analyze challenges faced by a leader who seeks to improve the agents' collective performance.