Equilibrium in Justifiable Strategies: A Model of Reason-Based Choice in Extensive-Form Games.

I explore the idea that people care about the justifiability of their decisions in the context of two-person extensive games. Each player justifies his strategy s with a belief b of the opponent's strategy, which is consistent with the play path and maximally plausible (according to some exogenous criterion). We say that s is justifiable if against the ex post criticism that some other strategy s outperforms s against b, the player can argue that playing s would have exposed him to similar criticism in the opposite direction. Under a simplicity-based plausibility criterion, this concept implies systematic departures from maximizing behaviour in familiar games. Copyright 2002 by The Review of Economic Studies Limited