Common belief in rationality in psychological games

Stephan Jagau and Andrés Perea

Journal of Mathematical Economics, 2022, vol. 100, issue C

Abstract: Psychological games enable us to study diverse motivations like anger, guilt, and intention-based reciprocity using models of rational strategic choice based on common belief in rationality (aka correlated rationalizability). This is achieved by letting utility depend not only on outcomes and beliefs about others’ behavior but also on higher-order beliefs. It is an open question whether such belief-dependent utilities can be made consistent with common belief in rationality in all empirically relevant cases. In this paper, we use a novel existence condition to show that common belief in rationality is possible for any empirically relevant case of belief-dependent utility. In addition, we present a recursive elimination procedure that characterizes common belief in rationality under minimal assumptions on belief-dependent utility functions.

Keywords: Psychological games; Belief-dependent motivation; Strategic rationality; Common belief in rationality; Rationalizability; Epistemic game theory (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:mateco:v:100:y:2022:i:c:s0304406822000015

DOI: 10.1016/j.jmateco.2022.102635

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