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Weakly rational expectations

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  • Hellman, Ziv

Abstract

Aumann and Drèze (2008) characterised the set of interim expected payoffs that players may have in rational belief systems, in which there is common knowledge of rationality and a common prior. We show here that common knowledge of rationality is not needed: when rationality is satisfied in the support of an action-consistent distribution (a concept introduced by Barelli (2009)), one obtains exactly the same set of rational expectations, despite the fact that in such ‘weakly rational belief systems’ there may not be mutual knowledge of rationality, let alone common knowledge of rationality. In the special case of two-player zero-sum games, the only expected payoff is the minmax value, even under these weak assumptions.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Mathematical Economics.

Volume (Year): 49 (2013)
Issue (Month): 6 ()
Pages: 496-500

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Handle: RePEc:eee:mateco:v:49:y:2013:i:6:p:496-500

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Web page: http://www.elsevier.com/locate/jmateco

Related research

Keywords: Rationality; Common knowledge; Rational expectations; Pairwise action-consistency; Epistemic game theory;

References

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  1. AUMANN, Robert J. & DREZE, Jacques H., . "Rational expectations in games," CORE Discussion Papers RP -2011, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  2. Feinberg, Yossi, 2000. "Characterizing Common Priors in the Form of Posteriors," Journal of Economic Theory, Elsevier, vol. 91(2), pages 127-179, April.
  3. Ziv Hellman & Dov Samet, 2010. "How Common Are Common Priors?," Discussion Paper Series dp532, The Center for the Study of Rationality, Hebrew University, Jerusalem.
  4. Barelli, Paulo, 2009. "Consistency of beliefs and epistemic conditions for Nash and correlated equilibria," Games and Economic Behavior, Elsevier, vol. 67(2), pages 363-375, November.
  5. Samet, Dov, 1998. "Common Priors and Separation of Convex Sets," Games and Economic Behavior, Elsevier, vol. 24(1-2), pages 172-174, July.
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