TARK Conference 2013 Conference Paper
- Adam Bjorndahl
- Joseph Y. Halpern
- Rafael Pass
theory, beginning with [6] and expanded in [3], is an enrichment of the classical setting meant to capture these kinds of preferences and motivations. In a similar vein, work on reference-dependent preferences, as developed in [7], formalizes phenomena such as loss-aversion by augmenting players’ preferences with an additional sense of gain or loss derived by comparing the actual outcome to what was expected. In both of these theories, the method of generalization takes the same basic form: the domain of the utility functions is enlarged to include not only the outcomes of the game, but also the beliefs of the players. The resulting structure may be fairly complex; for instance, in psychological game theory, since the goal is to model preferences that depend not only on beliefs about outcomes, but also beliefs about beliefs, beliefs about beliefs about beliefs, and so on, the domain of the utility functions is extended to include infinite hierarchies of beliefs. The model we present in this paper, though motivated in part by a desire to capture belief-dependent preferences, is geared towards a much more general goal. Besides being expressive enough to subsume existing systems such as those described above, it establishes a general framework for modeling players with richer preferences. Moreover, it is equally capable of representing impoverished preferences, a canonical example of which are so-called “coarse beliefs” or “categorical thinking” [9]. More specifically, our formalism provides good practical and theoretical tools for handling beliefs as discrete rather than continuous objects, an advantage that is particularly relevant in the context of psychological effects in games. Despite this expressive power, the system is easy to use: player preferences are represented in a simple and natural manner, narrowing the divide between intuition and formalism. As a preliminary illustration of some of these points, consider the following simple example. We introduce language-based games, a generalization of psychological games [6] that can also capture referencedependent preferences [7]. The idea is to extend the domain of the utility function to situations, maximal consistent sets in some language. The role of the underlying language in this framework is thus particularly critical. Of special interest are languages that can express only coarse beliefs [9]. Despite the expressive power of the approach, we show that it can describe games in a simple, natural way. Nash equilibrium and rationalizability are generalized to this setting; Nash equilibrium is shown not to exist in general, while the existence of rationalizable strategies is proved under mild conditions.