An exploration of type indeterminacy in strategic decision-making

Abstract

In this paper we explore an extension of the Type Indeterminacy model of decision-making to strategic decision-making. A 2 x 2 game is investigated. We first show that in a one-shot simultaneous move setting the TI-model is equivalent to the standard Bayes-Harsanyi model. We then let the game be preceded by a cheap-talk promise game. We show in an example that in the TI-model the promise stage can have an impact on the next following behavior when the standard Bayes- Harsanyi model predicts no impact whatsoever. The TI approach differs from other behavioral approaches in identifying the source of the effect of cheap-talk promises in the intrinsic indeterminacy of the players' type. © Springer-Verlag Berlin Heidelberg 2009.