We, You, I, and the Other

To capture humans’ moral sense game theorists have introduced the Kantian counterfactual. The Nash counterfactual considers the question: what would happen were I to change my behavior on the assumption that no one else does. By contrast, the Kantian counterfactual considers the question: what would happen were everyone to deviate from some behavior? In this paper, we present a model that endogenizes the decision to engage in this type of Kantian reasoning. Our model thus differs from recent approaches to Kantian reasoning in the literature that appeal to exogenous features to explain the level of moral behavior. We show that our model allows one to identify playing a Kantian strategy with playing what we call a ‘we-strategy’, an identification that is made plausible by the inclusion of psychic payoffs. We go on to prove that agents playing our model optimally achieve weakly Pareto socially optimal outcomes. We end by discussing a theorem that places a constraint on agents who achieve positive expected material payoffs and in so doing explains patterns of giving that can be found in nature.