A Psychological Game with Interdependent Preference Types

In psychological games, higher-order beliefs, emotions, and motives - in addition to actions - affect players’ payoffs. Suppose you are invited to a party, movie, dinner, etc not because your company is desired but because the inviter would feel guilty if she did not invite you. In all of these cases, it is conceivable that the intention behind the action will matter and hence will affect your payoffs. I show that this social interaction is a psychological game. However, under certain conditions, it is a special case of games with interdependent preference types as studied in Gul and Pesendorfer (2005). I find a complex social interaction in this game. In particular, there exists a unique equilibrium in which a player may stick to a strategy of accepting every invitation with the goal of discouraging insincere invitations. This may lead one to erroneously infer that this player is eagerly waiting for an invitation, when indeed his behavior is driven more by strategic considerations than by an excessive desire for social acceptance. The discussion shows that while games with interdependent preference types can capture phenomena that psychological games seek to address, the intuition, motivation, or explanation for the same phenomenon may be different. I discuss how being tolerated but not being truly accepted can explain the rejection of mutually beneficial trades, the choice of identity, social exclusion, marital divorce, and political correctness.