Rationalizable Conjectural Equilibrium: Between Nash and Rationalizability
AbstractFor a steady state to be a Nash equilibrium the agents have to perfectly observe the actions of others. This paper suggests a solution concept for cases where players observe only an imperfect signal of what the others' actions are. The model is enriched by specifying the signal that each player has about the actions taken by the others. The solution, which we call rationalizbale conjectural equilibrium (RCE), is a profile of actions such that each player's action is optimal, given the assumption that it is common knowledge that all players maximize their expected utility given their knowledge. The RCE occupies an intermediary position between Nash equilibrium on one hand and Rationalizability style Bernheim-Pearce on the other hand. The concept is demonstrated by several examples in which it refines the rationalizability concept and still is not equivalent to Nash equilibrium.
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Bibliographic InfoPaper provided by Northwestern University, Center for Mathematical Studies in Economics and Management Science in its series Discussion Papers with number 933.
Date of creation: May 1991
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Postal: Center for Mathematical Studies in Economics and Management Science, Northwestern University, 580 Jacobs Center, 2001 Sheridan Road, Evanston, IL 60208-2014
Web page: http://www.kellogg.northwestern.edu/research/math/
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Other versions of this item:
- Rubinstein Ariel & Wolinsky Asher, 1994. "Rationalizable Conjectural Equilibrium: Between Nash and Rationalizability," Games and Economic Behavior, Elsevier, vol. 6(2), pages 299-311, March.
- A. Rubinstein & A. Wolinsky, 2010. "Rationalizable Conjectural Equilibrium: Between Nash and Rationalizability," Levine's Working Paper Archive 369, David K. Levine.
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- D. B. Bernheim, 2010.
"Rationalizable Strategic Behavior,"
Levine's Working Paper Archive
661465000000000381, David K. Levine.
- Battigalli, Pierpaolo, 2003. "Rationalizability in infinite, dynamic games with incomplete information," Research in Economics, Elsevier, vol. 57(1), pages 1-38, March.
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