Strategies and Equilibrium in a Game with a Moral Player

Abstract: The topic of morality has been investigated from the perspective of conditions and influences that result in immoral behavior or a deviation from moral or ethical choices. At the same time, moral perspective of the situation has not received such attention in behavioral economics. Previous research reveals that moral choice is not the best option in every situation, especially in experiments designed to provoke the deviation, but there is always a fraction of cases where individuals nevertheless choose the moral alternative. This paper entertains the proposition that such cases occur due to a skewed perception induced by individual's morality. Strategic implications are examined as a thought exercise within a normal form, simultaneous and repeated game framework, focusing on two elements of the skewed perception: moral satisfaction and a motivated ignorance of immoral alternatives. The findings point out to existence of game settings where a moral choice is the best strategy and leads to an equilibrium. However, any other game setting indicates unfavorable outcome for the moral player. In addition, skewed perception enhances perceived payoff whereby moral player suffers real loss before suffering perceived loss. Perception skewed by morality, therefore, causes strategic implications.