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The Benefits of Coarse Preferences

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  • Halpern, Joe
  • Heller, Yuval
  • Winter, Eyal

Abstract

We study the strategic advantages of coarsening one’s utility by clustering nearby payoffs together (i.e., classifying them the same way). Our solution concept, coarse-utility equilibrium (CUE) requires that (1) each player maximizes her coarse utility, given the opponent’s strategy, and (2) the classifications form best replies to one another. We characterize CUEs in various games. In particular, we show that there is a qualitative difference between CUEs in which only one of the players clusters payoffs, and those in which all players cluster their payoffs, and that the latter type induce players to treat co-players better than in Nash equilibria in the large class of games with monotone externalities.

Suggested Citation

  • Halpern, Joe & Heller, Yuval & Winter, Eyal, 2022. "The Benefits of Coarse Preferences," MPRA Paper 111670, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:111670
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    References listed on IDEAS

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    Cited by:

    1. Tóbiás, Áron, 2023. "Rational Altruism," Journal of Economic Behavior & Organization, Elsevier, vol. 207(C), pages 50-80.

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    More about this item

    Keywords

    Categorization; language; indirect evolutionary approach; monotone externalities; strategic complements; strategic substitutes.;
    All these keywords.

    JEL classification:

    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness

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