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Towards a Theory of Deception

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Author Info

  • David Ettinger
  • Philippe Jehiel

Abstract

This paper proposes an equilibrium approach to deception where deception is defined to be the process by which actions are chosen to induce erroneous inferences so as to take advantage of them. Specifically, we introduce a framework with boundedly rational players in which agents make inferences based on a coarse information about others' behaviors: Agents are assumed to know only the average reaction function of other agents over groups of situations. Equilibrium requires that the coarse information available to agents is correct, and that inferences and optimizations are made based on the simplest theories compatible with the available information. We illustrate the phenomenon of deception and how reputation concerns may arise even in zero-sum games in which there is no value to commitment. We further illustrate how the possibility of deception affects standard economic insights through a number of stylized applications including a monitoring game and two simple bargaining games. The approach can be viewed as formalizing into a game theoretic setting a well documented bias in social psychology, the Fundamental Attribution Error.

(This abstract was borrowed from another version of this item.)

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Bibliographic Info

Paper provided by UCLA Department of Economics in its series Levine's Bibliography with number 122247000000000775.

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Date of creation: 05 Jun 2006
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Handle: RePEc:cla:levrem:122247000000000775

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References

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  1. Jeheil Phillippe, 1995. "Limited Horizon Forecast in Repeated Alternate Games," Journal of Economic Theory, Elsevier, vol. 67(2), pages 497-519, December.
  2. Philippe Jehiel & Frédéric Koessler, 2006. "Revisiting Games of Incomplete Information with Analogy-Based Expectations," Levine's Bibliography 122247000000000252, UCLA Department of Economics.
  3. David Kreps & Robert Wilson, 1999. "Reputation and Imperfect Information," Levine's Working Paper Archive 238, David K. Levine.
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  8. Fudenberg, Drew & Levine, David K, 1989. "Reputation and Equilibrium Selection in Games with a Patient Player," Econometrica, Econometric Society, vol. 57(4), pages 759-78, July.
  9. Philippe Jeniel, 2001. "Analogy-Based Expectation Equilibrium," Economics Working Papers 0003, Institute for Advanced Study, School of Social Science.
  10. Sendhil Mullainathan & Joshua Schwartzstein & Andrei Shleifer, 2006. "Coarse Thinking and Persuasion," NBER Working Papers 12720, National Bureau of Economic Research, Inc.
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  20. Crawford, Vincent P., 2001. "Lying for Strategic Advantage: Rational and Boundedly Rational Misrepresentation of Intentions," University of California at San Diego, Economics Working Paper Series qt6k65014s, Department of Economics, UC San Diego.
  21. Spiegler, Ran, 2006. "Competition over agents with boundedly rational expectations," Theoretical Economics, Econometric Society, vol. 1(2), pages 207-231, June.
  22. Spence, A Michael, 1973. "Job Market Signaling," The Quarterly Journal of Economics, MIT Press, vol. 87(3), pages 355-74, August.
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  25. Reinhard Selten, 1974. "The Chain Store Paradox," Working Papers 018, Bielefeld University, Center for Mathematical Economics.
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Citations

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Cited by:
  1. Jihong Lee, 2007. "Unforeseen Contingency and Renegotiation with Asymmetric Information," Birkbeck Working Papers in Economics and Finance 0717, Birkbeck, Department of Economics, Mathematics & Statistics.
  2. Kartik, Navin & Ottaviani, Marco & Squintani, Francesco, 2007. "Credulity, lies, and costly talk," Journal of Economic Theory, Elsevier, vol. 134(1), pages 93-116, May.
  3. Jehiel, Philippe, 2011. "Manipulative auction design," Theoretical Economics, Econometric Society, vol. 6(2), May.

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