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Bounded interpersonal inferences and decision making

Summary.

Individual decision making is based on predictions about other players' choices as well as on valuations of reactions to predictions. In this sense, a player has a prediction-decision criterion for decision making. We develop a theory of prediction-decision criteria, which enables us to capture new phenomena on individual decision making in games. The decision making situation is described in the epistemic logic GL\(_{EF}\) of shallow depths. There, each player considers his and other players' decision making down to some shallow depths. It is a point of our theory to investigate inferential complexities of interpersonal introspections. In particular, we can discuss a minimal epistemic inferential structure for prediction-decision making. We will find parallel structures in decision making and prediction making, which is called an inner parallelism. The climax of the paper is the consideration of inner parallelisms of prediction-decision making.

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Received: August 31, 2000; revised version: April 9, 2001

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Kaneko, M., Suzuki, NY. Bounded interpersonal inferences and decision making. Econ Theory 19, 63–103 (2002). https://doi.org/10.1007/s001990100203

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  • DOI: https://doi.org/10.1007/s001990100203

  • Keywords and Phrases: Shallow epistemic depth, Prediction-decision criterion, Epistemic structure, Complexity of interpersonal introspection, Inner parallelism.
  • JEL Classification Numbers: C60, C69, D89.