Interdependent Preferences and Strategic Distinguishability
54 Pages Posted: 22 Dec 2010 Last revised: 26 Aug 2016
Date Written: August 25, 2016
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: Suggested Citation