Interdependent Preferences and Strategic Distinguishability
Yale University - Cowles Foundation - Department of Economics
Princeton University - Department of Economics
National University of Singapore (NUS) - Department of Economics
August 25, 2016
Economic Theory Center Working Paper No. 008-2014
We study agents whose expected utility preferences are interdependent for informational or psychological reasons. We characterize when two types can be strategically distinguished in the sense that they are guaranteed to behave differently in some finite mechanism. We show that two types are strategically distinguishable if and only if they have different hierarchies of interdependent preferences. The same characterization applies for rationalizability, equilibrium, and any interim solution concept in between. Our results generalize and unify results of Abreu and Matsushima (1992), who characterize strategic distinguishability on fixed finite type spaces, and Dekel, Fudenberg, and Morris (2006), (2007), who characterize strategic distinguishability without interdependent preferences.
Number of Pages in PDF File: 54
Keywords: Interdependent Preferences, Higher Order Preferences, Hierarchy of Preferences, Strategic Distinguishability
JEL Classification: C79, D82, D83
Date posted: December 22, 2010 ; Last revised: August 26, 2016
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