A General Game-Theoretic Model of Preference Adaptations in Problematic Social Situations

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Abstract
This article analyzes the active and intentional modification of preferences as a mechanism of cooperation in “problematic” social situations (i.e., situations where individually rational behavior generates outcomes that are suboptimal in the Pareto sense). It is shown that an intentional modification of preferences in such situations can result in a generalization of Sen's Assurance Game preferences. As a formal framework for the analysis, a noncooperative N-person preference adaptation game is used. In this game, actors are able to choose effective preference orderings of outcomes in an underlying problematic situation. Under rather general conditions, mutual choice of generalized Assurance Game preferences is an ε-equilibrium point (Radner) in a preference adaptation game.