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A Theory of Deception

Author

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  • David Ettinger
  • Philippe Jehiel

Abstract

This paper proposes an equilibrium approach to belief manipulation and deception in which agents only have coarse knowledge of their opponent's strategy. Equilibrium requires the coarse knowledge available to agents to be correct, and the inferences and optimizations to be made on the basis of the simplest theories compatible with the available knowledge. The approach can be viewed as formalizing into a game theoretic setting a well documented bias in social psychology, the fundamental attribution error. It is applied to a bargaining problem, thereby revealing a deceptive tactic that is hard to explain in the full rationality paradigm. (JEL C78, D83, D84)

Suggested Citation

  • David Ettinger & Philippe Jehiel, 2010. "A Theory of Deception," American Economic Journal: Microeconomics, American Economic Association, vol. 2(1), pages 1-20, February.
    • Handle: RePEc:aea:aejmic:v:2:y:2010:i:1:p:1-20
    Note: DOI: 10.1257/mic.2.1.1
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    References listed on IDEAS

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    1. Sendhil Mullainathan & Joshua Schwartzstein & Andrei Shleifer, 2008. "Coarse Thinking and Persuasion," The Quarterly Journal of Economics, Oxford University Press, vol. 123(2), pages 577-619.
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    5. Jehiel, Philippe & Samet, Dov, 2007. "Valuation equilibrium," Theoretical Economics, Econometric Society, vol. 2(2), June.
    6. Jehiel, Philippe, 2005. "Analogy-based expectation equilibrium," Journal of Economic Theory, Elsevier, vol. 123(2), pages 81-104, August.
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    8. Andrew Postlewaite & Olivier Compte, 2008. "Repeated Relationships with Limits on Information Processing," PIER Working Paper Archive 08-026, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania.
    9. Vincent P. Crawford, 2003. "Lying for Strategic Advantage: Rational and Boundedly Rational Misrepresentation of Intentions," American Economic Review, American Economic Association, vol. 93(1), pages 133-149, March.
    10. Ignacio Esponda, 2008. "Behavioral Equilibrium in Economies with Adverse Selection," American Economic Review, American Economic Association, vol. 98(4), pages 1269-1291, September.
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    12. Jeheil Phillippe, 1995. "Limited Horizon Forecast in Repeated Alternate Games," Journal of Economic Theory, Elsevier, vol. 67(2), pages 497-519, December.
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    Cited by:

    1. Emir Kamenica & Matthew Gentzkow, 2011. "Bayesian Persuasion," American Economic Review, American Economic Association, vol. 101(6), pages 2590-2615, October.
    2. Ennio Bilancini & Leonardo Boncinelli, 2014. "Persuasion with Reference Cues and Elaboration Costs," Center for Economic Research (RECent) 102, University of Modena and Reggio E., Dept. of Economics "Marco Biagi".
    3. Spiegler, Ran, 2018. "News and Archival Information in Games," CEPR Discussion Papers 12805, C.E.P.R. Discussion Papers.
    4. Philippe Jehiel & Larry Samuelson, 2012. "Reputation with Analogical Reasoning," The Quarterly Journal of Economics, Oxford University Press, vol. 127(4), pages 1927-1969.
    5. Christoph March, 2011. "Adaptive social learning," PSE Working Papers halshs-00572528, HAL.
    6. Marco Serena, 2019. "A Game-Free Microfoundation of Mutual Optimism," Games, MDPI, Open Access Journal, vol. 10(4), pages 1-14, September.
    7. Jehiel, Philippe, 2011. "Manipulative auction design," Theoretical Economics, Econometric Society, vol. 6(2), May.
    8. Jeanne Hagenbach & Frédéric Koessler, 2019. "Partial Language Competence," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-01988076, HAL.
    9. Asen Ivanov & Dan Levin & James Peck, 2009. "Hindsight, Foresight, and Insight: An Experimental Study of a Small-Market Investment Game with Common and Private Values," American Economic Review, American Economic Association, vol. 99(4), pages 1484-1507, September.
    10. Vikander Nick, 2019. "Sellouts, Beliefs, and Bandwagon Behavior," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 19(1), pages 1-21, January.
    11. Mira Frick & Ryota Iijima & Yuhta Ishii, 2018. "Dispersed Behavior and Perceptions in Assortative Societies," Cowles Foundation Discussion Papers 2128, Cowles Foundation for Research in Economics, Yale University.
    12. Ran Spiegler, 2016. "Bayesian Networks and Boundedly Rational Expectations," The Quarterly Journal of Economics, Oxford University Press, vol. 131(3), pages 1243-1290.
    13. Bilancini, Ennio & Boncinelli, Leonardo, 2018. "Rational attitude change by reference cues when information elaboration requires effort," Journal of Economic Psychology, Elsevier, vol. 65(C), pages 90-107.
    14. Ellingsen, Tore & Östling, Robert & Wengström, Erik, 2018. "How does communication affect beliefs in one-shot games with complete information?," Games and Economic Behavior, Elsevier, vol. 107(C), pages 153-181.
    15. Bilancini, Ennio & Boncinelli, Leonardo, 2018. "Signaling to analogical reasoners who can acquire costly information," Games and Economic Behavior, Elsevier, vol. 110(C), pages 50-57.
    16. Hagenbach, Jeanne & Koessler, Frédéric, 2017. "The Streisand effect: Signaling and partial sophistication," Journal of Economic Behavior & Organization, Elsevier, vol. 143(C), pages 1-8.
    17. Jihong Lee, 2008. "Unforeseen Contingency and Renegotiation with Asymmetric Information," Economic Journal, Royal Economic Society, vol. 118(528), pages 678-694, April.
    18. repec:pit:wpaper:381 is not listed on IDEAS
    19. Ran Spiegler, 2017. "“Data Monkeys”: A Procedural Model of Extrapolation from Partial Statistics," Review of Economic Studies, Oxford University Press, vol. 84(4), pages 1818-1841.
    20. Mailath, George J. & Samuelson, Larry, 2015. "Reputations in Repeated Games," Handbook of Game Theory with Economic Applications,, Elsevier.
    21. Huck, Steffen & Jehiel, Philippe & Rutter, Tom, 2011. "Feedback spillover and analogy-based expectations: A multi-game experiment," Games and Economic Behavior, Elsevier, vol. 71(2), pages 351-365, March.
    22. Sobel, Joel, 2020. "Lying and Deception in Games," University of California at San Diego, Economics Working Paper Series qt0015j574, Department of Economics, UC San Diego.
    23. Hagenbach, Jeanne & Koessler, Frédéric, 2020. "Cheap talk with coarse understanding," Games and Economic Behavior, Elsevier, vol. 124(C), pages 105-121.
    24. Edward Cartwright & Amrish Patel, 2010. "Public Goods, Social Norms, and Naïve Beliefs," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 12(2), pages 199-223, April.

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    More about this item

    JEL classification:

    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations

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