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Towards a theory of deception

  • Philippe Jehiel

    (UCL - University College London - London's Global University - University College of London (UCL), PSE - Paris-Jourdan Sciences Economiques - CNRS : UMR8545 - École des Hautes Études en Sciences Sociales (EHESS) - École des Ponts ParisTech (ENPC) - École normale supérieure [ENS] - Paris)

  • David Ettinger

    (EPEE - Centre d'Etudes des Politiques Economiques - Université d'Evry-Val d'Essonne)

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.

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Paper provided by HAL in its series PSE Working Papers with number halshs-00590767.

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Date of creation: Sep 2005
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Handle: RePEc:hal:psewpa:halshs-00590767
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  20. Uri Gneezy, 2005. "Deception: The Role of Consequences," American Economic Review, American Economic Association, vol. 95(1), pages 384-394, March.
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  29. Philippe Jehiel, 2005. "Analogy-Based Expectation Equilibrium," Levine's Bibliography 784828000000000106, UCLA Department of Economics.
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