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Incorporating belief-dependent motivation in games

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  • Battigalli, Pierpaolo
  • Corrao, Roberto
  • Dufwenberg, Martin

Abstract

Psychological game theory (PGT), introduced by Geanakoplos et al. (1989) and significantly generalized by Battigalli and Dufwenberg (2009), extends the standard game theoretic framework by letting players’ utility at endnodes depend on their interactive beliefs. While it is understood that a host of applications that model and/or test the role of emotional and other psychological forces find their home in PGT, the framework is abstract and comprises complex mathematical objects, such as players’ infinite hierarchies of beliefs. Thus, PGT provides little guidance on how to model specific belief-dependent motivations and use them in game theoretic analysis. This paper takes steps to fill this gap. Some aspects are simplified – e.g., which beliefs matter – but others are refined and brought closer to applications by providing more structure. We start with belief-dependent motivations and show how to embed them in game forms to obtain psychological games. We emphasize the role of time and of the perception of players’ intentions. We take advantage of progress made on the foundations of game theory to expand and improve on PGT solution concepts.

Suggested Citation

  • Battigalli, Pierpaolo & Corrao, Roberto & Dufwenberg, Martin, 2019. "Incorporating belief-dependent motivation in games," Journal of Economic Behavior & Organization, Elsevier, vol. 167(C), pages 185-218.
  • Handle: RePEc:eee:jeborg:v:167:y:2019:i:c:p:185-218
    DOI: 10.1016/j.jebo.2019.04.009
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    2. Battigalli, Pierpaolo & Corrao, Roberto & Sanna, Federico, 2020. "Epistemic game theory without types structures: An application to psychological games," Games and Economic Behavior, Elsevier, vol. 120(C), pages 28-57.
    3. Kozlovskaya, Maria & Nicoló, Antonio, 2019. "Public good provision mechanisms and reciprocity," Journal of Economic Behavior & Organization, Elsevier, vol. 167(C), pages 235-244.
    4. Sanjit Dhami & Junaid Arshad & Ali al-Nowaihi, 2019. "Psychological and Social Motivations in Microfinance Contracts: Theory and Evidence," CESifo Working Paper Series 7773, CESifo.
    5. Smith, Alec, 2019. "Lagged beliefs and reference-dependent utility," Journal of Economic Behavior & Organization, Elsevier, vol. 167(C), pages 331-340.
    6. Attanasi, Giuseppe & Battigalli, Pierpaolo & Manzoni, Elena & Nagel, Rosemarie, 2019. "Belief-dependent preferences and reputation: Experimental analysis of a repeated trust game," Journal of Economic Behavior & Organization, Elsevier, vol. 167(C), pages 341-360.
    7. Aina, Chiara & Battigalli, Pierpaolo & Gamba, Astrid, 2020. "Frustration and anger in the Ultimatum Game: An experiment," Games and Economic Behavior, Elsevier, vol. 122(C), pages 150-167.
    8. Bjorndahl, Adam & Halpern, Joseph Y. & Pass, Rafael, 2020. "Bayesian games with intentions," Games and Economic Behavior, Elsevier, vol. 123(C), pages 54-67.
    9. Liu, Fen, 2021. "Rationality and Emotions: A Model of Inner Games and Ego Identity," MPRA Paper 105704, University Library of Munich, Germany.
    10. Pierpaolo Battigalli & Martin Dufwenberg, 2020. "Belief-Dependent Motivations and Psychological Game Theory," CESifo Working Paper Series 8285, CESifo.
    11. Bigoni, Maria & Bortolotti, Stefania & Nas Özen, Efşan, 2019. "Economic Polarization and Antisocial Behavior: An Experiment," IZA Discussion Papers 12553, Institute of Labor Economics (IZA).
    12. Dhami, Sanjit & Wei, Mengxing & al-Nowaihi, Ali, 2019. "Public goods games and psychological utility: Theory and evidence," Journal of Economic Behavior & Organization, Elsevier, vol. 167(C), pages 361-390.
    13. Battigalli, Pierpaolo & Dufwenberg, Martin & Smith, Alec, 2019. "Frustration, aggression, and anger in leader-follower games," Games and Economic Behavior, Elsevier, vol. 117(C), pages 15-39.
    14. Cartwright, Edward, 2019. "A survey of belief-based guilt aversion in trust and dictator games," Journal of Economic Behavior & Organization, Elsevier, vol. 167(C), pages 430-444.
    15. Livio, Luca & De Chiara, Alessandro, 2019. "Friends or foes? Optimal incentives for reciprocal agents," Journal of Economic Behavior & Organization, Elsevier, vol. 167(C), pages 245-278.
    16. Khalmetski, Kiryl, 2019. "Evasion of guilt in expert advice," Journal of Economic Behavior & Organization, Elsevier, vol. 167(C), pages 296-310.
    17. Pierpaolo Battigalli & Martin Dufwenberg, 2019. "Psychological Game Theory," Working Papers 646, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
    18. Guilhem Lecouteux, 2021. "Who's Afraid of Incoherence? Behavioural Welfare Economics and the Sovereignty of the Neoclassical Consumer," GREDEG Working Papers 2021-01, Groupe de REcherche en Droit, Economie, Gestion (GREDEG CNRS), Université Côte d'Azur, France.

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    More about this item

    Keywords

    Psychological game theory; Belief-dependent motivation; Intentions; Time; Rationalizability; Self-confirming equilibrium; Bayesian sequential equilibrium;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • D92 - Microeconomics - - Micro-Based Behavioral Economics - - - Intertemporal Firm Choice, Investment, Capacity, and Financing

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