Coevolution of deception and preferences: Darwin and Nash meet Machiavelli

TL;DR

This paper presents a framework where preferences and deception coevolve, showing that only efficient outcomes are stable when considering cognitive costs and deception advantages in strategic interactions.

Contribution

It introduces a novel model combining preference evolution with deception capabilities, analyzing stability conditions for outcomes in strategic settings.

Findings

Only efficient outcomes can be stable.

Stability depends on the balance between deviation gains and deception costs.

Higher cognitive ability enables deception, influencing strategic stability.

Abstract

We develop a framework in which individuals' preferences coevolve with their abilities to deceive others about their preferences and intentions. Specifically, individuals are characterised by (i) a level of cognitive sophistication and (ii) a subjective utility function. Increased cognition is costly, but higher-level individuals have the advantage of being able to deceive lower-level opponents about their preferences and intentions in some of the matches. In the remaining matches, the individuals observe each other's preferences. Our main result shows that, essentially, only efficient outcomes can be stable. Moreover, under additional mild assumptions, we show that an efficient outcome is stable if and only if the gain from unilateral deviation is smaller than the effective cost of deception in the environment.