Where value depends on what others will value, rational players stop reasoning about the thing and reason about each other's reasoning.
Keynes's 1936 image of picking not the prettiest face but the face others will pick — and then the face others expect others to pick. It is the standard account of bubbles and of fashion.
In practice
- A recruiter hires the candidate they believe the panel will approve, and the panel selects the candidate they believe the board expects.
- A fund buys a stock because it expects others to buy it, and the company's earnings enter nobody's reasoning.
- Standing
- Explains asset bubbles, fashion, and hiring for prestige.
- Further reading
- Wikipedia
- Subject
- Games & Strategic Interaction
- Essay
- The recurring shapes of conflict and cooperation