You can’t be Pareto and game-theoretically stable at the same time (I have a nice picture proof of that, that I’ll post some time). You can be stable without being Pareto—we each choose our favoured outcome, and go 50-50 between them. Then no one has an incentive to lie.
You can estimate where the others’ favoured outcomes and go a ways in the opposite direction to try to balance it out. Of course, if one of you takes this to the second level and the others are honest, then no one is happy except by coincidence (one of the honest people deviated from the mean more than you in the same way, and your overshoot happened to land on them).
You can’t be Pareto and game-theoretically stable at the same time (I have a nice picture proof of that, that I’ll post some time). You can be stable without being Pareto—we each choose our favoured outcome, and go 50-50 between them. Then no one has an incentive to lie.
Edit: Picture-proof now posted at: http://lesswrong.com/r/discussion/lw/8qv/in_the_pareto_world_liars_prosper/
I seem to have an incentive to lie in that scenario.
You can estimate where the others’ favoured outcomes and go a ways in the opposite direction to try to balance it out. Of course, if one of you takes this to the second level and the others are honest, then no one is happy except by coincidence (one of the honest people deviated from the mean more than you in the same way, and your overshoot happened to land on them).