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Interdependent Preferences and Strategic Distinguishability

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We study agents whose expected utility preferences are interdependent for informational or psychological reasons. We characterize when two types can be “strategically distinguished” in the sense that they are guaranteed to behave differently in some finite mechanism. We show that two types are strategically distinguishable if and only if they have different hierarchies of interdependent preferences. The same characterization applies for rationalizability, equilibrium, and any interim solution concept in between. Our results generalize and unify results of Abreu and Matsushima (1992), who characterize strategic distinguishability on fixed finite type spaces, and Dekel, Fudenberg, and Morris (2006), (2007), who characterize strategic distinguishability without interdependent preferences.

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File URL: http://cowles.yale.edu/sites/default/files/files/pub/d17/d1772-r3.pdf
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Paper provided by Cowles Foundation for Research in Economics, Yale University in its series Cowles Foundation Discussion Papers with number 1772R3.

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Length: 51 pages
Date of creation: Sep 2010
Date of revision: Aug 2016
Handle: RePEc:cwl:cwldpp:1772r3
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Yale University, Box 208281, New Haven, CT 06520-8281 USA

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Fax: (203) 432-6167
Web page: http://cowles.yale.edu/

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Order Information: Postal: Cowles Foundation, Yale University, Box 208281, New Haven, CT 06520-8281 USA

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