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Quotient Spaces of Boundedly Rational Types

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  • Davide Cianciaruso
  • Fabrizio Germano

Abstract

By identifying types whose low-order beliefs up to level ℓ i about the state of nature coincide, we obtain quotient type spaces that are typically smaller than the original ones, preserve basic topological properties, and allow standard equilibrium analysis even under bounded reasoning. Our Bayesian Nash (ℓ i; ℓ ii )-equilibria capture players inability to distinguish types belonging to the same equivalence class. The case with uncertainty about the vector of levels (ℓ i; ℓ ii ) is also analyzed. Two examples illustrate the constructions.

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Bibliographic Info

Paper provided by Barcelona Graduate School of Economics in its series Working Papers with number 582.

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Date of creation: Sep 2011
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Handle: RePEc:bge:wpaper:582

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Keywords: Incomplete-information games; high-order reasoning; type space; quotient space; hierarchies of beliefs; bounded rationality;

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  9. Willemien Kets, 2012. "Bounded Reasoning and Higher-Order Uncertainty," Discussion Papers 1547, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
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  12. Tomasz Strzalecki, 1969. "Depth of Reasoning and Higher Order Beliefs," Working Paper 8334, Harvard University OpenScholar.
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