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Choosing one's preferences

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  • Guilhem Lecouteux

    (X-DEP-ECO - Département d'Économie de l'École Polytechnique - X - École polytechnique)

Abstract

A central assumption in economics is that individuals are rational in the sense that they seek to satisfy their preferences, by choosing the action that maximizes a utility function that represents those preferences. However, it appears that in strategic interaction with other rational agents, the individuals can bene t from strategic commitments. We determine the set of games for which strategic commitments can be bene cial to the players, by building an analytical framework in which players can choose their own preferences before playing a game. We show that players make strategic commitments as soon as there exists a Stackelberg equilibrium that is not a Nash equilibrium, but also that there always exists at least one set of preference relations at the equilibrium such that a Nash equilibrium is implemented. We then show that the possibility of making strategic commitments generates cooperative behaviours in the case of supermodular games.

Suggested Citation

  • Guilhem Lecouteux, 2013. "Choosing one's preferences," Working Papers hal-00864704, HAL.
    • Handle: RePEc:hal:wpaper:hal-00864704
    Note: View the original document on HAL open archive server: https://hal.science/hal-00864704
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    References listed on IDEAS

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    Keywords

    strategic commitment; choice of preferences; Stackelberg; supermodularity;
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