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Lying for Strategic Advantage: Rational and Boundedly Rational Misrepresentation of Intentions

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Author Info
Vincent P. Crawford

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Abstract

Starting from an example of the Allies' decision to feint at Calais and attack Normandy on D-Day, this paper models misrepresentation of intentions to competitors or enemies. Allowing for the possibility of bounded strategic rationality and rational players' responses to it yields a sensible account of lying via costless, noiseless messages. In some leading cases, the model has generically unique pure-strategy sequential equilibria, in which rational players exploit boundedly rational players, but are not themselves fooled. In others, the model has generically essentially unique mixed-strategy sequential equilibria, in which rational players' strategies protect all players from exploitation.

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Publisher Info
Article provided by American Economic Association in its journal American Economic Review.

Volume (Year): 93 (2003)
Issue (Month): 1 (March)
Pages: 133-149
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Handle: RePEc:aea:aecrev:v:93:y:2003:i:1:p:133-149

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References listed on IDEAS
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  1. Kreps, David M. & Wilson, Robert, 1982. "Reputation and imperfect information," Journal of Economic Theory, Elsevier, vol. 27(2), pages 253-279, August. [Downloadable!] (restricted)
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  2. Rabin Matthew, 1994. "A Model of Pre-game Communication," Journal of Economic Theory, Elsevier, vol. 63(2), pages 370-391, August. [Downloadable!] (restricted)
  3. Farrell, Joseph & Gibbons, Robert, 1989. "Cheap Talk with Two Audiences," American Economic Review, American Economic Association, vol. 79(5), pages 1214-23, December. [Downloadable!] (restricted)
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  4. John Conlisk, 2001. "Costly Predation and the Distribution of Competence," American Economic Review, American Economic Association, vol. 91(3), pages 475-484, June. [Downloadable!] (restricted)
  5. Camerer, Colin F. & Ho, Teck H. & Chong, Juin-Kuan., 2000. "Sophisticated EWA Learning and Strategic Teaching in Repeated Games," Working Papers 1087, California Institute of Technology, Division of the Humanities and Social Sciences. [Downloadable!]
  6. Farrell, Joseph & Rabin, Matthew, 1996. "Cheap Talk," Journal of Economic Perspectives, American Economic Association, vol. 10(3), pages 103-18, Summer. [Downloadable!] (restricted)
  7. Stahl Dale O. & Wilson Paul W., 1995. "On Players' Models of Other Players: Theory and Experimental Evidence," Games and Economic Behavior, Elsevier, vol. 10(1), pages 218-254, July. [Downloadable!] (restricted)
  8. Blume, Andreas & DeJong, Douglas V. & Kim, Yong-Gwan & Sprinkle, Geoffrey B., 2001. "Evolution of Communication with Partial Common Interest," Games and Economic Behavior, Elsevier, vol. 37(1), pages 79-120, October. [Downloadable!] (restricted)
  9. Reny, Philip J, 1992. "Backward Induction, Normal Form Perfection and Explicable Equilibria," Econometrica, Econometric Society, vol. 60(3), pages 627-49, May. [Downloadable!] (restricted)
  10. Costa-Gomes, Miguel & Crawford, Vincent P & Broseta, Bruno, 2001. "Cognition and Behavior in Normal-Form Games: An Experimental Study," Econometrica, Econometric Society, vol. 69(5), pages 1193-1235, September.
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  11. Sobel, Joel, 1985. "A Theory of Credibility," Review of Economic Studies, Blackwell Publishing, vol. 52(4), pages 557-73, October. [Downloadable!] (restricted)
  12. Dilip Abreu & Rajiv Sethi, 2001. "Evolutionary Stability in a Reputational Model of Bargaining," Game Theory and Information 0103001, EconWPA. [Downloadable!]
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  13. Loury, G., 1993. "Self-Censorship in Public Discourse: A Theory of 'Political Correctness' and Related Phenomena," Papers 23, Boston University - Department of Economics.
  14. Costa-Gomes, Miguel A., 2002. "A Suggested Interpretation of Some Experimental Results on Preplay Communication," Journal of Economic Theory, Elsevier, vol. 104(1), pages 104-136, May. [Downloadable!] (restricted)
  15. Morgan, John & Stocken, Phillip C, 2003. " An Analysis of Stock Recommendations," RAND Journal of Economics, The RAND Corporation, vol. 34(1), pages 183-203, Spring.
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  16. Milgrom, Paul & Roberts, John, 1982. "Predation, reputation, and entry deterrence," Journal of Economic Theory, Elsevier, vol. 27(2), pages 280-312, August. [Downloadable!] (restricted)
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  17. Jong-Il Kim & Lawrence J. Lau, 1996. "The sources of Asian Pacific economic growth," Canadian Journal of Economics, Canadian Economics Association, vol. 29(s1), pages 448-54, April. [Downloadable!] (restricted)
  18. Aumann, Robert & Brandenburger, Adam, 1995. "Epistemic Conditions for Nash Equilibrium," Econometrica, Econometric Society, vol. 63(5), pages 1161-80, September. [Downloadable!] (restricted)
  19. Benabou, Roland & Laroque, Guy, 1992. "Using Privileged Information to Manipulate Markets: Insiders, Gurus, and Credibility," The Quarterly Journal of Economics, MIT Press, vol. 107(3), pages 921-58, August. [Downloadable!] (restricted)
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  20. Crawford, Vincent P & Sobel, Joel, 1982. "Strategic Information Transmission," Econometrica, Econometric Society, vol. 50(6), pages 1431-51, November. [Downloadable!] (restricted)
  21. Selten, Reinhard, 1998. "Features of experimentally observed bounded rationality," European Economic Review, Elsevier, vol. 42(3-5), pages 413-436, May. [Downloadable!] (restricted)
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  22. Farrell Joseph, 1993. "Meaning and Credibility in Cheap-Talk Games," Games and Economic Behavior, Elsevier, vol. 5(4), pages 514-531, October. [Downloadable!] (restricted)
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  23. Shimoji, Makoto & Watson, Joel, 1998. "Conditional Dominance, Rationalizability, and Game Forms," Journal of Economic Theory, Elsevier, vol. 83(2), pages 161-195, December. [Downloadable!] (restricted)
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  24. Crawford, Vincent, 1998. "A Survey of Experiments on Communication via Cheap Talk," Journal of Economic Theory, Elsevier, vol. 78(2), pages 286-298, February. [Downloadable!] (restricted)
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