The Counter-deception Blog

David Ettinger and Philippe Jehiel
22nd November 2004

Abstract
This paper proposes an equilibrium approach to deception where deception is defined to be the process by which actions are made to induce erroneous inferences to take advantage of them. Specifically, we introduce a framework with boundedly rational players in which agents make inferences based on a limited number of cues providing only limited aspects of other agents’ strategies. We define an equilibrium concept to describe the interaction of such agents - the concept is called Analogy-based Perfect Bayesian Equilibrium and it shares elements of the Sequential Equilibrium (Kreps and Wilson (1982)) and the Analogy-based Expectation Equilibrium (Jehiel (2004)). We next illustrate the phenomenon of deception and how reputation concerns may arise even in zero-sum games in which there is no value to commitment. We then consider the phenomenon of deception in a number of stylized applications: a monitoring game and two simple bargaining games.

Full Paper