The mathematical framework of psychological game theory is useful for describing many forms of motivation where preferences depend directly on own or others' beliefs. It allows for incorporation of emotions, reciprocity, image concerns, and self-esteem in economic analysis. We explain how and why, discussing basic theory, a variety of sentiments, experiments, and applied work.
Keywords: psychological game theory; belief-dependent motivation; reciprocity; emotions; image concerns; self-esteem
JEL codes: C72; D91