Procedural Concerns in Psychological Games∗

One persistent finding in experimental economics is that people react very differently to outcomewise identical situations depending on the procedures which have led to them. In accordance with this, there exists a broad consensus among psychologists that not only expected outcomes shape human behavior, but also the way in which decisions are taken. Economists, on the other hand, have remained remarkably silent about procedural aspects of strategic interactions. This paper provides a game theoretic framework that integrates procedural concerns into economic analysis. Building on Battigalli and Dufwenberg (2005)’s framework of dynamic psychological games, we show how procedural concerns can be conceptualized assuming that agents are (also) motivated by belief-dependent psychological payoffs. Procedural choices influence the causal attribution of responsibilities, the evaluation of intentions and the arousal of emotions. Two applications highlight the impact and importance of procedural concerns in strategic interactions.