Common belief of rationality in games of perfect information
AbstractAumann (1995) showed that for games with perfect information common knowledge of substantive rationality implies backward induction. Substantive rationality is defined in epistemic terms, that is, in terms of knowledge. We show that when substantive rationality is defined in doxastic terms, that is, in terms of belief, then common belief of substantive rationality implies backward induction. Aumann (1998) showed that material rationality implies backward induction in the centipede game. This result does not hold when rationality is defined doxastically. However, if beliefs are interpersonally consistent then common belief of material rationality in the centipede game implies common belief of backward induction.
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Bibliographic InfoArticle provided by Elsevier in its journal Games and Economic Behavior.
Volume (Year): 79 (2013)
Issue (Month): C ()
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Web page: http://www.elsevier.com/locate/inca/622836
Perfect information; Common belief; Rationality; Backward induction; Centipede game;
Find related papers by JEL classification:
- C70 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - General
- C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
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