Magical thinking: A representation result

Brendan Daley and Philipp Sadowski ()
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Philipp Sadowski: Department of Economics, Duke University

Theoretical Economics, 2017, vol. 12, issue 2

Abstract: This paper suggests a novel way to import the approach of axiomatic theories of individual choice into strategic settings and demonstrates the benefits of this approach. We propose both a tractable behavioral model as well as axioms applied to the behavior of the collection of players, focusing first on Prisoners' Dilemma games. A representation theorem establishes these axioms as the precise behavioral content of the model, and that the model's parameters are (essentially) uniquely identified from behavior. The behavioral model features magical thinking: players behave as if their expectations about their opponents' behavior vary with their own choices. The model provides a unified view of documented behavior in a range of often-studied games, such as the Prisoners' Dilemma, the Battle of the Sexes, Hawk-Dove, and the Stag Hunt, and also generates novel predictions across games.

Keywords: Magical thinking; axioms/representation theorem; prisoners' dilemma; coordination games (search for similar items in EconPapers)
JEL-codes: C7 D8 (search for similar items in EconPapers)
Date: 2017-05-30
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Citations: View citations in EconPapers (8)

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