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Mental Equilibrium and Rational Emotions

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  • Eyal Winter
  • Ignacio Garcia-Jurado
  • Jose Mendez-Naya
  • Luciano Mendez-Naya

Abstract

We introduce emotions into an equilibrium notion. In a mental equilibrium each player "selects" an emotional state which determines the player's preferences over the outcomes of the game. These preferences typically differ from the players' material preferences. The emotional states interact to play a Nash equilibrium and in addition each player's emotional state must be a best response (with respect to material preferences) to the emotional states of the others. We discuss the concept behind the definition of mental equilibrium and show that this behavioral equilibrium notion organizes quite well the results of some of the most popular experiments in the experimental economics literature. We shall demonstrate the role of mental equilibrium in incentive mechaisms and will discuss the concept of collective emotions, which is based on the idea that players can coordinate their emotional states.

Suggested Citation

  • Eyal Winter & Ignacio Garcia-Jurado & Jose Mendez-Naya & Luciano Mendez-Naya, 2009. "Mental Equilibrium and Rational Emotions," Discussion Paper Series dp521, The Federmann Center for the Study of Rationality, the Hebrew University, Jerusalem.
  • Handle: RePEc:huj:dispap:dp521
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    References listed on IDEAS

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    Cited by:

    1. Wolpert, David H., 2010. "Why income comparison is rational," Games and Economic Behavior, Elsevier, vol. 69(2), pages 458-474, July.

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