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Towards a Theory of Deception

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  • 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.)

Suggested Citation

  • David Ettinger & Philippe Jehiel, 2006. "Towards a Theory of Deception," Levine's Bibliography 122247000000000775, UCLA Department of Economics.
  • Handle: RePEc:cla:levrem:122247000000000775
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    File URL: http://www.enpc.fr/ceras/jehiel/deception.pdf
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Jehiel, Philippe, 2011. "Manipulative auction design," Theoretical Economics, Econometric Society, vol. 6(2), May.
    2. Jihong Lee, 2008. "Unforeseen Contingency and Renegotiation with Asymmetric Information," Economic Journal, Royal Economic Society, vol. 118(528), pages 678-694, April.
    3. Kartik, Navin & Ottaviani, Marco & Squintani, Francesco, 2007. "Credulity, lies, and costly talk," Journal of Economic Theory, Elsevier, vol. 134(1), pages 93-116, May.

    More about this item

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty

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