This paper proposes an equilibrium approach to belief manipulation and deception in strategic interactions, where agents have coarse knowledge of their opponent's strategy. The approach formalizes the Fundamental Attribution Error in a game theoretic setting and applies it to a bargaining problem, revealing a deceptive tactic that is hard to explain in the full rationality paradigm. The paper introduces the concept of analogy-based sequential equilibrium, where players have correct expectations about their opponents' aggregate behavior in analogy classes. The paper also discusses the implications of cognitive limitations on strategic interactions and deception.
documents/EFTA01137487.pdf
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