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Payoff Information and Self-Confirming Equilibrium

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  • Levine, David
  • Dekel, Eddie
  • Fudenberg, Drew

Abstract

In a self-confirming equilibrium, each player correctly forecasts the actions that opponents will take along the equilibrium path, but may be mistaken about the way that opponents would respond to deviations. This paper develops a refinement of self-confirming equilibrium in which players use information about opponents' payoffs in forming beliefs about the way that opponents play off of the equilibrium path. We show that this concept is robust to payoff uncertainty. We also discuss its relationship to other concepts and show that it is closely related to assuming almost common certainty of payoffs in an epistemic model with independent beliefs.

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File URL: http://dash.harvard.edu/bitstream/handle/1/3200614/fudenberg_payoff.pdf
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Bibliographic Info

Paper provided by Harvard University Department of Economics in its series Scholarly Articles with number 3200614.

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Date of creation: 1999
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Publication status: Published in Journal of Economic Theory
Handle: RePEc:hrv:faseco:3200614

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  1. Ariel Rubinstein & Asher Wolinsky, 1991. "Rationalizable Conjectural Equilibrium: Between Nash and Rationalizability," Discussion Papers 933, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  2. David Kreps & Robert Wilson, 1998. "Sequential Equilibria," Levine's Working Paper Archive 237, David K. Levine.
  3. P. Reny, 2010. "Common Belief and the Theory of Games with Perfect Information," Levine's Working Paper Archive 386, David K. Levine.
  4. Costa-Gomes, Miguel & Crawford, Vincent P. & Broseta, Bruno, 1998. "Cognition and Behavior in Normal-Form Games: An Experimental Study," University of California at San Diego, Economics Working Paper Series qt1vn4h7x5, Department of Economics, UC San Diego.
  5. Bernheim, B Douglas, 1984. "Rationalizable Strategic Behavior," Econometrica, Econometric Society, vol. 52(4), pages 1007-28, July.
  6. Philip J. Reny, 1992. "Rationality in Extensive-Form Games," Journal of Economic Perspectives, American Economic Association, vol. 6(4), pages 103-118, Fall.
  7. Werlang, Sérgio Ribeiro da Costa & Chin-Chiu Tan, Tommy, 1987. "The Bayesian Foundations of Solution Concepts of Games," Economics Working Papers (Ensaios Economicos da EPGE) 111, FGV/EPGE Escola Brasileira de Economia e Finanças, Getulio Vargas Foundation (Brazil).
  8. Levine, David & Kreps, David & Fudenberg, Drew, 1988. "On the Robustness of Equilibrium Refinements," Scholarly Articles 3350444, Harvard University Department of Economics.
  9. Drew Fudenberg & Jean Tirole, 1991. "Game Theory," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262061414, December.
  10. Drew Fudenberg & David K. Levine, 1993. "Steady State Learning and Nash Equilibrium," Levine's Working Paper Archive 373, David K. Levine.
  11. Drew Fudenberg & Eddie Dekel, 1987. "Rational Behavior with Payoff Uncertainty," Working papers 471, Massachusetts Institute of Technology (MIT), Department of Economics.
  12. Pearce, David G, 1984. "Rationalizable Strategic Behavior and the Problem of Perfection," Econometrica, Econometric Society, vol. 52(4), pages 1029-50, July.
  13. Fudenberg, Drew & Levine, David K, 1993. "Self-Confirming Equilibrium," Econometrica, Econometric Society, vol. 61(3), pages 523-45, May.
  14. Basu, Kaushik, 1988. "Strategic irrationality in extensive games," Mathematical Social Sciences, Elsevier, vol. 15(3), pages 247-260, June.
  15. Ben-Porath, Elchanan, 1997. "Rationality, Nash Equilibrium and Backwards Induction in Perfect-Information Games," Review of Economic Studies, Wiley Blackwell, vol. 64(1), pages 23-46, January.
  16. Gul, Faruk, 1996. "Rationality and Coherent Theories of Strategic Behavior," Journal of Economic Theory, Elsevier, vol. 70(1), pages 1-31, July.
  17. Borgers Tilman, 1994. "Weak Dominance and Approximate Common Knowledge," Journal of Economic Theory, Elsevier, vol. 64(1), pages 265-276, October.
  18. Blume, Lawrence E & Zame, William R, 1994. "The Algebraic Geometry of Perfect and Sequential Equilibrium," Econometrica, Econometric Society, vol. 62(4), pages 783-94, July.
  19. Battigalli, Pierpaolo, 2003. "Rationalizability in infinite, dynamic games with incomplete information," Research in Economics, Elsevier, vol. 57(1), pages 1-38, March.
  20. D. Pearce, 2010. "Rationalizable Strategic Behavior and the Problem of Perfection," Levine's Working Paper Archive 523, David K. Levine.
  21. Monderer, Dov & Samet, Dov, 1989. "Approximating common knowledge with common beliefs," Games and Economic Behavior, Elsevier, vol. 1(2), pages 170-190, June.
  22. D. Fudenberg & D. M. Kreps, 2010. "Learning in Extensive Games, I: Self-Confirming Equilibrium," Levine's Working Paper Archive 382, David K. Levine.
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