  We study the strategic advantages of coarsening one's utility by clustering
nearby payoffs together (i.e., classifying them the same way). Our solution
concept, coarse-utility equilibrium (CUE) requires that (1) each player
maximizes her coarse utility, given the opponent's strategy, and (2) the
classifications form best replies to one another. We characterize CUEs in
various games. In particular, we show that there is a qualitative difference
between CUEs in which only one of the players clusters payoffs, and those in
which all players cluster their payoffs, and that the latter type induce
players to treat co-players better than in Nash equilibria in the large class
of games with monotone externalities.
