TY - JOUR
T1 - Dynamic psychological games
AU - Battigalli, Pierpaolo
AU - Dufwenberg, Martin
N1 - Funding Information:
We thank Geir Asheim, Oliver Board, Adam Brandenburger, Andrew Caplin, Amanda Friedenberg, Drew Fudenberg, Georg Kirchsteiger, Botond Koszegi, Jing Li, David Pearce, Ludovic Renou, Klaus Ritzberger, Joel Sobel, and participants in several seminars for helpful discussions. For their kind hospitality, we thank the Economics Departments of the Stern School of Business at NYU, the European University Institute (Battigalli), and Göteborg University (Dufwenberg). We gratefully acknowledge financial support from Bocconi University and MIUR (Battigalli) and from the NSF (Dufwenberg).
PY - 2009/1
Y1 - 2009/1
N2 - The motivation of decision makers who care for various emotions, intentions-based reciprocity, or the opinions of others may depend directly on beliefs (about choices, beliefs, or information). Geanakoplos, Pearce and Stacchetti [J. Geanakoplos, D. Pearce, E. Stacchetti, Psychological games and sequential rationality, Games Econ. Behav. 1 (1989) 60-79] point out that traditional game theory is ill-equipped to address such matters, and they pioneer a new framework which does. However, their toolbox - psychological game theory - incorporates several restrictions that rule out plausible forms of belief-dependent motivation. Building on recent work on dynamic interactive epistemology, we propose a more general framework. Updated higher-order beliefs, beliefs of others, and plans of action may influence motivation, and we can capture dynamic psychological effects (such as sequential reciprocity, psychological forward induction, and regret) that were previously ruled out. We develop solution concepts, provide examples, explore properties, and suggest avenues for future research.
AB - The motivation of decision makers who care for various emotions, intentions-based reciprocity, or the opinions of others may depend directly on beliefs (about choices, beliefs, or information). Geanakoplos, Pearce and Stacchetti [J. Geanakoplos, D. Pearce, E. Stacchetti, Psychological games and sequential rationality, Games Econ. Behav. 1 (1989) 60-79] point out that traditional game theory is ill-equipped to address such matters, and they pioneer a new framework which does. However, their toolbox - psychological game theory - incorporates several restrictions that rule out plausible forms of belief-dependent motivation. Building on recent work on dynamic interactive epistemology, we propose a more general framework. Updated higher-order beliefs, beliefs of others, and plans of action may influence motivation, and we can capture dynamic psychological effects (such as sequential reciprocity, psychological forward induction, and regret) that were previously ruled out. We develop solution concepts, provide examples, explore properties, and suggest avenues for future research.
KW - Belief-dependent motivation
KW - Dynamic interactive epistemology
KW - Extensive-form solution concepts
KW - Psychological games
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U2 - 10.1016/j.jet.2008.01.004
DO - 10.1016/j.jet.2008.01.004
M3 - Article
AN - SCOPUS:57349146265
SN - 0022-0531
VL - 144
SP - 1
EP - 35
JO - Journal of Economic Theory
JF - Journal of Economic Theory
IS - 1
ER -