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A Psychological Game with Interdependent Preference Types

  • J. Atsu Amegashie
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    In psychological games, higher-order beliefs, emotions, and motives - in addition to actions - affect players’ payoffs. Suppose you are invited to a party, movie, dinner, etc not because your company is desired but because the inviter would feel guilty if she did not invite you. In all of these cases, it is conceivable that the intention behind the action will matter and hence will affect your payoffs. I show that this social interaction is a psychological game. However, under certain conditions, it is a special case of games with interdependent preference types as studied in Gul and Pesendorfer (2005). I find a complex social interaction in this game. In particular, there exists a unique equilibrium in which a player may stick to a strategy of accepting every invitation with the goal of discouraging insincere invitations. This may lead one to erroneously infer that this player is eagerly waiting for an invitation, when indeed his behavior is driven more by strategic considerations than by an excessive desire for social acceptance. The discussion shows that while games with interdependent preference types can capture phenomena that psychological games seek to address, the intuition, motivation, or explanation for the same phenomenon may be different. I discuss how being tolerated but not being truly accepted can explain the rejection of mutually beneficial trades, the choice of identity, social exclusion, marital divorce, and political correctness.

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    File URL: http://www.cesifo-group.de/portal/page/portal/DocBase_Content/WP/WP-CESifo_Working_Papers/wp-cesifo-2006/wp-cesifo-2006-10/cesifo1_wp1824.pdf
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    Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 1824.

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    Date of creation: 2006
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    Handle: RePEc:ces:ceswps:_1824
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    1. Gary Charness & Martin Dufwenberg, 2006. "Promises and Partnership," Econometrica, Econometric Society, vol. 74(6), pages 1579-1601, November.
    2. Ruffle, Bradley J., 1999. "Gift giving with emotions," Journal of Economic Behavior & Organization, Elsevier, vol. 39(4), pages 399-420, July.
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    4. Brandts, J. & Sola, C., 1998. "Reference Points and Negative Reciprocity in Simple Sequential Games," UFAE and IAE Working Papers 425.98, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
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    9. McCabe, Kevin A. & Rigdon, Mary L. & Smith, Vernon L., 2003. "Positive reciprocity and intentions in trust games," Journal of Economic Behavior & Organization, Elsevier, vol. 52(2), pages 267-275, October.
    10. Dufwenberg, Martin, 2002. "Marital investments, time consistency and emotions," Journal of Economic Behavior & Organization, Elsevier, vol. 48(1), pages 57-69, May.
    11. Akerlof, George A & Dickens, William T, 1982. "The Economic Consequences of Cognitive Dissonance," American Economic Review, American Economic Association, vol. 72(3), pages 307-19, June.
    12. George A. Akerlof & Rachel E. Kranton, 2000. "Economics And Identity," The Quarterly Journal of Economics, MIT Press, vol. 115(3), pages 715-753, August.
    13. Gilboa, Itzhak & Schmeidler, David, 1988. "Information dependent games : Can common sense be common knowledge?," Economics Letters, Elsevier, vol. 27(3), pages 215-221.
    14. Werlang, Sérgio Ribeiro da Costa, 1988. "Common knowledge," Economics Working Papers (Ensaios Economicos da EPGE) 118, FGV/EPGE Escola Brasileira de Economia e Finanças, Getulio Vargas Foundation (Brazil).
    15. Darity, William Jr. & Mason, Patrick L. & Stewart, James B., 2006. "The economics of identity: The origin and persistence of racial identity norms," Journal of Economic Behavior & Organization, Elsevier, vol. 60(3), pages 283-305, July.
    16. Loury, G., 1993. "Self-Censorship in Public Discourse: A Theory of 'Political Correctness' and Related Phenomena," Papers 23, Boston University - Department of Economics.
    17. Dufwenberg, Martin & Kirchsteiger, Georg, 2000. "Reciprocity and wage undercutting," European Economic Review, Elsevier, vol. 44(4-6), pages 1069-1078, May.
    18. Geanakoplos, John & Pearce, David & Stacchetti, Ennio, 1989. "Psychological games and sequential rationality," Games and Economic Behavior, Elsevier, vol. 1(1), pages 60-79, March.
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