Higher-order theory of mind is especially useful in unpredictable negotiations

In social interactions, people often reason about the beliefs, goals and intentions of others. This theory of mind allows them to interpret the behavior of others, and predict how they will behave in the future. People can also use this ability recursively: they use higher-order theory of mind to reason about the theory of mind abilities of others, as in "he thinks that I don't know that he sent me an anonymous letter". Previous agent-based modeling research has shown that the usefulness of higher-order theory of mind reasoning can be useful across competitive, cooperative, and mixed-motive settings. In this paper, we cast a new light on these results by investigating how the predictability of the environment influences the effectiveness of higher-order theory of mind. Our results show that the benefit of (higher-order) theory of mind reasoning is strongly dependent on the predictability of the environment. We consider agent-based simulations in repeated one-shot negotiations in a particular negotiation setting known as Colored Trails. When this environment is highly predictable, agents obtain little benefit from theory of mind reasoning. However, if the environment has more observable features that change over time, agents without the ability to use theory of mind experience more difficulties predicting the behavior of others accurately. This in turn allows theory of mind agents to obtain higher scores in these more dynamic environments. These results suggest that the human-specific ability for higher-order theory of mind reasoning may have evolved to allow us to survive in more complex and unpredictable environments.