Coevolution of Deception and Preferences: Darwin and Nash Meet Machiavelli
46 Pages Posted: 2 Sep 2014 Last revised: 27 Sep 2018
Date Written: September 21, 2018
We develop a framework in which individuals' preferences coevolve with their abilities to deceive others about their preferences and intentions. Specifically, individuals are characterised by (i) a level of cognitive sophistication and (ii) a subjective utility function. Increased cognition is costly, but higher-level individuals have the advantage of being able to deceive lower-level opponents about their preferences and intentions in some of the matches. In the remaining matches, the individuals observe each other's preferences. Our main result shows that, essentially, only efficient outcomes can be stable. Moreover, under additional mild assumptions, we show that an efficient outcome is stable if and only if the gain from unilateral deviation is smaller than the effective cost of deception in the environment. Finally, we extend our model to study preferences that depend also on the opponent's type.
Keywords: Evolution of Preferences, Indirect Evolutionary Approach, Theory of Mind, Depth of Reasoning, Deception
JEL Classification: C72, C73, D01, D03, D83
Suggested Citation: Suggested Citation