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RichardKennaway comments on Even with default points, systems remain exploitable - Less Wrong Discussion
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Where did that knowledge of another's preferences come from? If all the players know each others' preferences, what they claim about their own is irrelevant. If they know nothing but each others' claims about their preferences, and can claim anything they like, then they cannot communicate their preferences.
Real negotiations happen somewhere between these degenerate cases.
Here's another case (the worrying one): one player has much greater knowledge of the other's preferences than vice versa.
But your mutual knowledge does raise an interesting point...
I wonder if there's a way of Player X saying "I know that player Y's true valuation is BLAH", while convincing people that player X is actually telling the truth about what he thinks he knows. Maybe being completely transparent wouldn't be such a disadvantage as it seems...
If all they can do is make claims about themselves that no-one is in a position to check, then they cannot communicate anything. Non-verbal evidence of some sort has to be shown. When everyone can lie without loss, words are not evidence of anything. Language is an iterated PD.