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Expectation Conformity in Strategic Cognition
We study situations in which players shape their own understanding of the game, as well as others’, through information acquisition, communication, and other forms of strategic cognition. We introduce the concept of expectation conformity: incentives to change cognition are stronger when others expect such changes and/or make similar changes themselves. Expectation conformity provides a revealed-preference characterization of equilibrium determinacy in cognitive games. When it fails, equilibrium cognition is unique, independently of cognitive costs. When it holds, suitable costs generate multiple equilibria. We illustrate the implications in two-player constant-sum and linear-quadratic-Gaussian games. The online supplement considers other forms of cognition.
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