Games with Perception

E. Iñarra, A. Laruelle and P. Zuazo-Garin
Journal of Mathematical Psychology 64-65, 58-65.

Abstract

We are interested in 2×2 game situations where players act depending on how they perceive their counterpart although this choice is payoff irrelevant. Perceptions concern a dichotomous characteristic. The model includes uncertainty as players know how they perceive their counterpart, but not how they are perceived. We study whether the mere possibility of playing differently depending on the counterpart's perception generates new equilibria. We analyze equilibria in which strategies are contingent on perception. We show that the existence of this discriminatory equilibrium depends on the characteristic in question and on the class of game. (JEL C72 )

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