A Theory of Games and Emotions
Choices are affected by emotions. The guilt aversion, for instance, may generate a compensatory behavior, anger generally leads to aggressive actions. But we can rationally think about our future emotions and they end up affecting our choices. If we take into account other agents' beliefs and emotions, the framework gets more complex and interesting.
The ERC-funded project Reasoning about Strategic Interactions and Emotions (STRATEMOTIONS), hosted by IGIER - Innocenzo Gasparini Institute for Economic Research, by Pierpaolo Battigalli, Professor at the Department of Decision Sciences, proposes to develop a general theory, expressed in a mathematical language, to analyze the dynamics of strategic interaction between intelligent agents who may be affected by how other agents think. A specific feature of the project is the integration of strategic thinking with psychological features, in order to take into account the role of emotions in shaping the agents' behavior.
"Here a few insights. The aversion to let others down may influence the decision to tell the truth. We are going to test the anticipation of an angry reaction when offering good or bad deals. We introduced the attitude toward uncertainty in the game, discovering that it makes it harder to predict the outcome of a strategic interaction and to disrupt the equilibrium with a small shock". Emotions are compatible with strategic thinking.
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