Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/76065
Authors: 
Friedman, Daniel
Singh, Nirvikar
Year of Publication: 
2002
Series/Report no.: 
CESifo Working Paper 766
Abstract: 
This paper introduces two ideas, emotional state dependent utility components (ESDUCs), and evolutionary perfect Bayesian equilibrium (EPBE). Using a simple extensive form game, we illustrate the efficiency-enhancing role of a powerful ESDUC, the vengeance motive. Incorporating behavioral noise and observational noise leads to a range of (short run) Perfect Bayesian equilibria (PBE) involving both vengeful and non-vengeful types. We then derive two (long run) EPBE, one where both types survive and reap mutual gains, and a second where only the non-vengeful type survives and there are no mutual gains.
Subjects: 
negative reciprocity
perfect Bayesian equilibrium
evolutionary perfect Bayesian equilibrium
emotional state dependent utility
JEL: 
B52
C73
D64
Z13
Document Type: 
Working Paper

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