Frustration and anger in the Ultimatum game: An experiment

Games and Economic Behavior, Issue 122, July 2020, pp.150-167
(joint with P. Battigalli, A. Gamba)

Is it possible to persuade others only by providing interpretations of future events? I study the general problem of manipulating a boundedly rational agent by controlling her interpretation of signals she is about to receive. Persuasion arises because the agent updates her beliefs and takes an action based on the narrative she finds most plausible given her prior beliefs. Leveraging this, not only is the persuader able to strategically manipulate the agent to maximize his expected utility, but he can also induce the agent to hold non Bayes-plausible beliefs across signal realizations. Allowing for multiple stories to be communicated before the signal realizes, I propose a disciplined relaxation of the Bayes-plausibility constraint. This paper seeks to provide insights on the mechanism behind incoherent perceptions of the observed facts and the impact of persuasion via storytelling. I illustrate the model with applications in politics, finance, nudging policies, and self-control task.