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Choosing one's preferences

Listed author(s):
  • Guilhem Lecouteux

    (Department of Economics, Ecole Polytechnique - Polytechnique - X - CNRS - Centre National de la Recherche Scientifique)

A central assumption in economics is that individuals are rational in the sense that they seek to satisfy their preferences, by choosing the action that maximizes a utility function that represents those preferences. However, it appears that in strategic interaction with other rational agents, the individuals can bene t from strategic commitments. We determine the set of games for which strategic commitments can be bene cial to the players, by building an analytical framework in which players can choose their own preferences before playing a game. We show that players make strategic commitments as soon as there exists a Stackelberg equilibrium that is not a Nash equilibrium, but also that there always exists at least one set of preference relations at the equilibrium such that a Nash equilibrium is implemented. We then show that the possibility of making strategic commitments generates cooperative behaviours in the case of supermodular games.

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Paper provided by HAL in its series Working Papers with number hal-00864704.

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Date of creation: 23 Sep 2013
Handle: RePEc:hal:wpaper:hal-00864704
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  1. Fershtman, Chaim & Kalai, Ehud, 1997. "Unobserved Delegation," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 38(4), pages 763-774, November.
  2. Anders Poulsen & Michael Roos, 2010. "Do people make strategic commitments? Experimental evidence on strategic information avoidance," Experimental Economics, Springer;Economic Science Association, vol. 13(2), pages 206-225, June.
  3. Samuelson, Larry, 2001. "Introduction to the Evolution of Preferences," Journal of Economic Theory, Elsevier, vol. 97(2), pages 225-230, April.
  4. Heifetz, Aviad & Shannon, Chris & Spiegel, Yossi, 2007. "What to maximize if you must," Journal of Economic Theory, Elsevier, vol. 133(1), pages 31-57, March.
  5. Hausman,Daniel M., 2012. "Preference, Value, Choice, and Welfare," Cambridge Books, Cambridge University Press, number 9781107015432.
  6. Fershtman, Chaim & Gneezy, Uri, 2001. "Strategic Delegation: An Experiment," RAND Journal of Economics, The RAND Corporation, vol. 32(2), pages 352-368, Summer.
  7. Hausman,Daniel M., 2012. "Preference, Value, Choice, and Welfare," Cambridge Books, Cambridge University Press, number 9781107695122.
  8. Sugden, Robert, 1991. "Rational Choice: A Survey of Contributions from Economics and Philosophy," Economic Journal, Royal Economic Society, vol. 101(407), pages 751-785, July.
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