Equilibrium vengeance

This paper introduces two ideas, emotional state dependent utility components (ESDUCs), and evolutionary perfect Bayesian equilibrium (EPBE). Using a simple extensive form game, we illustrate the e¢ciency-enhancing role of a powerful ESDUC, the vengeance motive. Incorporating behavioral noise and observational noise leads to a range of (short run) Perfect Bayesian equilibria (PBE) involving both vengeful and non-vengeful types. We then derive a (long run) non-trivial EPBE where both types survive and reap mutual gains, as well as a trivial EPBE with only the non-vengeful type and no mutual gains. This is an incomplete ...rst draft. Please ask permission before circulating further. Comments of all sorts are very welcome; email [email protected].