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How to make sense of the common prior assumption under incomplete information

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Author Info
Giacomo Bonanno () (Department of Economics, University of California, Davis, CA 95616-8578, USA)
Klaus Nehring () (Department of Economics, University of California, Davis, CA 95616-8578, USA)

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Abstract

Recent contributions have questioned the meaningfulness of the Common Prior Assumption (CPA) in situations of incomplete information. We characterize the CPA in terms of the primitives (individuals' belief hierarchies) without reference to an ex ante stage. The key is to rule out "agreeing to disagree" about any aspect of beliefs. Our results also yield a generalization of single-person Bayesian updating to situations without perfect recall. The entire analysis is carried out locally at the "true state", using beliefs only, rather than beliefs-plus-knowledge. We discuss the role of truth assumptions on beliefs for a satisfactory notion of the CPA, and point out an important conceptual discontinuity between the case of two and many individuals.

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Publisher Info
Article provided by Springer in its journal International Journal of Game Theory.

Volume (Year): 28 (1999)
Issue (Month): 3 ()
Pages: 409-434
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Handle: RePEc:spr:jogath:v:28:y:1999:i:3:p:409-434

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Related research
Keywords: Common prior · Harsanyi consistency · common belief · truth axiom;

Cited by:
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  1. Robin Hanson, 2003. "For Bayesian Wannabes, Are Disagreements Not About Information?," Theory and Decision, Springer, vol. 54(2), pages 105-123, March. [Downloadable!] (restricted)
  2. Yossi Feinberg & Marco Scarsini, 2003. "Rate of Arbitrage and Reconciled Beliefs," Economics Bulletin, Economics Bulletin, vol. 4(11), pages 1-12. [Downloadable!]
  3. Barton L. Lipman, 2005. "Finite Order Implications of Common Priors in Infinite Models," Boston University - Department of Economics - Working Papers Series WP2005-009, Boston University - Department of Economics. [Downloadable!]
  4. Pierpaolo Battigalli & Marciano Siniscalchi, 2003. "Rationalization and Incomplete Information," The B.E. Journal of Theoretical Economics, Berkeley Electronic Press, vol. 0(1). [Downloadable!]
    Other versions:
  5. Klaus Nehring, 2003. "Common Priors For Like-Minded Agents," Economics Working Papers 0035, Institute for Advanced Study, School of Social Science. [Downloadable!]
  6. Pierpaolo Battigalli, 2004. "Rationalization in Signaling Games: Theory and Applications," Working Papers 275, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University. [Downloadable!]
    Other versions:
  7. Heifetz, Aviad & Meier, Martin & Schipper, Burkhard C, 2009. "Unawareness, Beliefs and Speculative Trade," MPRA Paper 18437, University Library of Munich, Germany. [Downloadable!]
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