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Finite-order type spaces and applications

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  • Qin, Cheng-Zhong
  • Yang, Chun-Lei
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    Abstract

    We propose a framework of consistent finite-order priors to facilitate the incorporation of higher-order uncertainties into Bayesian game analysis, without invoking the concept of a universal type space. Several recent models, which give rise to stunning results with higher-order uncertainties, turn out to operate with certain consistent order-2 priors. We introduce canonical representations of consistent finite-order priors, which we apply to establish a criterion for determining the orders of strategically relevant beliefs for abstract Harsanyi type spaces. We derive finite-order projections of type spaces and discuss convergence of BNEs based on them as the projection order increases. Finally, we introduce finite-order total variation distances between priors, which are suitable for analyzing the issues on equilibrium continuity and robustness. We revisit recent advancements of Bayesian game theory and develop new insights based on our framework.

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    Bibliographic Info

    Article provided by Elsevier in its journal Journal of Economic Theory.

    Volume (Year): 148 (2013)
    Issue (Month): 2 ()
    Pages: 689-719

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    Handle: RePEc:eee:jetheo:v:148:y:2013:i:2:p:689-719

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    Web page: http://www.elsevier.com/locate/inca/622869

    Related research

    Keywords: Bayesian game; Common prior; Complete information; Consistent prior; Finite-order type space; Payoff type space; Projection type space; Robustness; Total variation distance;

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    References

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