Interdependent Preferences and Strategic Distinguishability
CFDP Revision Date
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.
Bergemann, Dirk; Morris, Stephen; and Takahashi, Satoru, "Interdependent Preferences and Strategic Distinguishability" (2010). Cowles Foundation Discussion Papers. 2112.