(Friday, 20th May 2016)
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Deception, lies and belief manipulation are key aspects of many economic and strategic interactions, including bargaining, industrial organization, military operations or poker …
For game theory, belief manipulation and deception are delicate to capture because traditional equilibrium approaches assume that players fully understand the strategy of their opponents. Therefore, the phenomenon of deception is represented with the ideas of playing mixed strategy in zero-sum interactions and of playing a pooling or semi-pooling equilibrium in signaling, communication or repeated games. Although fruitful, these approaches cannot capture the fact that players may be fooled. Along the equilibrium path, players’ beliefs are always consistent with actual behaviors. A new strand of literature suggests that agents may be actually fooled assuming that they are boundedly rational. We will introduce this literature (theoretical and experimental) and its links with the results in the standard rationality paradigm.
Bibliographical references :
Must read reference : Crawford, Vincent P. (2003): ”Lying for Strategic Advantage: Rational and Boundedly Rational Misrepresentation of Intentions”, American Economic Review, 93, 133-149.
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Must read reference : Ettinger, D. and Jehiel, P. (2010): “A Theory of Deception”, American Economic Journal: Microeconomics, 2, 1-20. Gneezy, U. (2005): “Deception: The Role of Consequences”, American Economic Review, 95, 384-394.
Gneezy, U. (2005): “Deception: The Role of Consequences”, American Economic Review, 95, 384-394.
Must read reference : Gabaix, X., and D. Laibson (2006): “Shrouded Attributes, Consumer Myopia, and Information Suppression in Competitive Markets”, Quarterly Journal of Economics, 121(2), 505-540.
Kreps, David and Wilson, Robert (1982b): “Reputation and Imperfect Information”, Journal of Economic Theory, 27, 253-279.
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Spiegler, R. (2006): “The Market for Quacks”, Review of Economic Studies, 73(4), 1113-1131.