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Beliefs in Network Games (Revised version of CentER DP 2007-46)

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  • Kets, W.

    (Tilburg University, Center for Economic Research)

Abstract

Networks can have an important effect on economic outcomes. Given the complexity of many of these networks, agents will generally not know their structure. We study the sensitivity of game-theoretic predictions to the specification of players’ (common) prior on the network in a setting where players play a fixed game with their neighbors and only have local information on the network structure. We show that two priors are close in a strategic sense if and only if (i) the priors assign similar probabilities to all events that involve a player and his neighbors, and (ii) with high probability, a player believes, given his type, that his neighbors’ conditional beliefs are close under the two priors, and that his neighbors believe, given their type, that. . . the conditional beliefs of their neighbors are close, for any number of iterations.

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Bibliographic Info

Paper provided by Tilburg University, Center for Economic Research in its series Discussion Paper with number 2008-5.

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Date of creation: 2008
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Handle: RePEc:dgr:kubcen:20085

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Web page: http://center.uvt.nl

Related research

Keywords: Network games; incomplete information; higher order beliefs; continuity; random networks; population uncertainty;

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  2. Marcel Fafchamps & Susan Lund, . "Risk Sharing Networks in Rural Philippines," Working Papers 97014, Stanford University, Department of Economics.
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  10. Milchtaich, Igal, 2004. "Random-player games," Games and Economic Behavior, Elsevier, vol. 47(2), pages 353-388, May.
  11. Andrea Galeotti & Sanjeev Goyal & Matthew O. Jackson & Fernando Vega-Redondo & Leeat Yariv, 2010. "Network Games," Review of Economic Studies, Oxford University Press, vol. 77(1), pages 218-244.
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  13. Timothy G. Conley & Christopher R. Udry, 2010. "Learning about a New Technology: Pineapple in Ghana," American Economic Review, American Economic Association, vol. 100(1), pages 35-69, March.
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