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

Author

Listed:
  • 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)

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.

Suggested Citation

  • Giacomo Bonanno & Klaus Nehring, 1999. "How to make sense of the common prior assumption under incomplete information," International Journal of Game Theory, Springer;Game Theory Society, vol. 28(3), pages 409-434.
    • Handle: RePEc:spr:jogath:v:28:y:1999:i:3:p:409-434
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