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

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  • Vincent P. Crawford

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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Bibliographic 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

Note: DOI: 10.1257/000282803321455197
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  1. Crawford, Vincent, 1998. "A Survey of Experiments on Communication via Cheap Talk," Journal of Economic Theory, Elsevier, vol. 78(2), pages 286-298, February.
  2. 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.
  3. J. Farrell, 2010. "Meaning and Credibility in Cheap Talk Games," Levine's Working Paper Archive 533, David K. Levine.
  4. Colin Camerer & Teck-Hua Ho, 1999. "Experience-weighted Attraction Learning in Normal Form Games," Econometrica, Econometric Society, vol. 67(4), pages 827-874, July.
  5. Joseph Farrell & Matthew Rabin, 1996. "Cheap Talk," Journal of Economic Perspectives, American Economic Association, vol. 10(3), pages 103-118, Summer.
  6. Benabou, R. & Laroque, G., 1989. "Using Privileged Information To Manipulate Markets: Insiders, Gurus, And Credibility," Working papers 513, Massachusetts Institute of Technology (MIT), Department of Economics.
  7. Abreu, Dilip & Sethi, Rajiv, 2003. "Evolutionary stability in a reputational model of bargaining," Games and Economic Behavior, Elsevier, vol. 44(2), pages 195-216, August.
  8. Reny, Philip J, 1992. "Backward Induction, Normal Form Perfection and Explicable Equilibria," Econometrica, Econometric Society, vol. 60(3), pages 627-49, May.
  9. Milgrom, Paul & Roberts, John, 1982. "Predation, reputation, and entry deterrence," Journal of Economic Theory, Elsevier, vol. 27(2), pages 280-312, August.
  10. Farrell, J. & Gibbons, R., 1989. "Cheap Talk With Two Audiences," Working papers 518, Massachusetts Institute of Technology (MIT), Department of Economics.
  11. Selten, Reinhard, 1998. "Features of experimentally observed bounded rationality," European Economic Review, Elsevier, vol. 42(3-5), pages 413-436, May.
  12. Crawford, Vincent P & Sobel, Joel, 1982. "Strategic Information Transmission," Econometrica, Econometric Society, vol. 50(6), pages 1431-51, November.
  13. repec:fth:stanho:e-89-7 is not listed on IDEAS
  14. Shimoji, Makoto & Watson, Joel, 1998. "Conditional Dominance, Rationalizability, and Game Forms," Journal of Economic Theory, Elsevier, vol. 83(2), pages 161-195, December.
  15. Kreps, David M. & Wilson, Robert, 1982. "Reputation and imperfect information," Journal of Economic Theory, Elsevier, vol. 27(2), pages 253-279, August.
  16. Morgan, J. & Stocken, P., 1998. "An Analysis of Stock Recommendations," Papers 204, Princeton, Woodrow Wilson School - Public and International Affairs.
  17. 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.
  18. Loury, G., 1993. "Self-Censorship in Public Discourse: A Theory of 'Political Correctness' and Related Phenomena," Papers 23, Boston University - Department of Economics.
  19. Sobel, Joel, 1985. "A Theory of Credibility," Review of Economic Studies, Wiley Blackwell, vol. 52(4), pages 557-73, October.
  20. Aumann, Robert & Brandenburger, Adam, 1995. "Epistemic Conditions for Nash Equilibrium," Econometrica, Econometric Society, vol. 63(5), pages 1161-80, September.
  21. Blume, Andreas & DeJong, Douglas V. & Kim, Yong-Gwan & Sprinkle, Geoffrey B., 1997. "Evolution of Communication with Partial Common Interest," Working Papers 97-18, University of Iowa, Department of Economics.
  22. Dale O. Stahl & Paul W. Wilson, 2010. "On Players' Models of Other Players: Theory and Experimental Evidence," Levine's Working Paper Archive 542, David K. Levine.
  23. Rabin Matthew, 1994. "A Model of Pre-game Communication," Journal of Economic Theory, Elsevier, vol. 63(2), pages 370-391, August.
  24. Blume, Andreas, et al, 1998. "Experimental Evidence on the Evolution of Meaning of Messages in Sender-Receiver Games," American Economic Review, American Economic Association, vol. 88(5), pages 1323-40, December.
  25. John Conlisk, 2001. "Costly Predation and the Distribution of Competence," American Economic Review, American Economic Association, vol. 91(3), pages 475-484, June.
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