Interdependent Preferences and Strategic Distinguishability

54 Pages Posted: 22 Dec 2010 Last revised: 26 Aug 2016

Dirk Bergemann

Yale University - Cowles Foundation - Department of Economics; Yale University - Cowles Foundation

Stephen Morris

Princeton University - Department of Economics

Satoru Takahashi

National University of Singapore (NUS) - Department of Economics

Multiple version iconThere are 5 versions of this paper

Date Written: August 25, 2016

Abstract

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.

Keywords: Interdependent Preferences, Higher Order Preferences, Hierarchy of Preferences, Strategic Distinguishability

JEL Classification: C79, D82, D83

Suggested Citation

Bergemann, Dirk and Morris, Stephen and Takahashi, Satoru, Interdependent Preferences and Strategic Distinguishability (August 25, 2016). Economic Theory Center Working Paper No. 008-2014. Available at SSRN: https://ssrn.com/abstract=1729280 or http://dx.doi.org/10.2139/ssrn.1729280

Dirk Bergemann (Contact Author)

Yale University - Cowles Foundation - Department of Economics ( email )

28 Hillhouse Ave
New Haven, CT 06520-8268
United States
203-432-3592 (Phone)
203-432-2128 (Fax)

HOME PAGE: http://www.econ.yale.edu/~dirk/

Yale University - Cowles Foundation

Box 208281
New Haven, CT 06520-8281
United States

Stephen Edward Morris

Princeton University - Department of Economics ( email )

Princeton, NJ 08544-1021
United States

Satoru Takahashi

National University of Singapore (NUS) - Department of Economics ( email )

1 Arts Link, AS2 #06-02
Singapore 117570, Singapore 119077
Singapore

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