This paper proposes an equilibrium approach to belief manipulation
and deception in which agents only have coarse knowledge of their
opponent's strategy. Equilibrium requires the coarse knowledge
available to agents to be correct, and the inferences and optimizations
to be made on the basis of the simplest theories compatible
with the available knowledge. The approach can be viewed as formalizing
into a game theoretic setting a well documented bias in
social psychology, the fundamental attribution error. It is applied
to a bargaining problem, thereby revealing a deceptive tactic that
is hard to explain in the full rationality paradigm. (JEL C78, D83,
Ettinger, David, and Philippe Jehiel.
"A Theory of Deception."
American Economic Journal: Microeconomics,
Bargaining Theory; Matching Theory
Search; Learning; Information and Knowledge; Communication; Belief