We offer a player alternative games like Fig. 33 that differ only in substituting values ranging from 0 to 9 for the 5’s in that matrix, leaving the 10’s and zeros as they are. We then ask him to “value” the games for us—to indicate how much he would pay for the opportunity to play the game with a live partner and real money payoffs. (Alternatively we ask him how much he’d pay for the privilege of playing the different variants in place of the one with 5.) If his response is fairly insensitive to variations in that particular payoff as long as it is positive, and if nevertheless he attaches a high value to the game with some positive payoff and attaches something like a random-strategy expected value for the game with zeros as in Fig. 32, we can conclude that the lower-left and upper-right payoffs are mainly of interest to him as signals.

XREF: This is a variant of revealed preference methodology; the insensitivity-to-payoff tactic connects to later behavioral economics work on separating signaling value from intrinsic value (e.g., gift-giving, status goods). QUESTION: Does this experimental design actually control for loss aversion or probability weight distortions that could also produce payoff insensitivity?

Thomas C. Schelling, The Strategy of Conflict, loc. 871