Bayesian equilibrium by iterative conjectures: a theory of games with players forming conjectures iteratively starting with first order uninformative conjectures
AbstractThis paper introduces a new game theoretic equilibrium, Bayesian equilibrium by iterative conjectures (BEIC). It requires agents to make predictions, starting from first order uninformative predictive distribution functions (or conjectures) and keep updating with statistical decision theoretic and game theoretic reasoning until a convergence of conjectures is achieved. In a BEIC, rationality is achieved for strategies and conjectures. The BEIC approach is capable of analyzing a larger set of games than current Nash Equilibrium based games theory, including games with inaccurate observations, games with unstable equilibrium and games with double or multiple sided incomplete information games. On the other hand, for the set of games analyzed by the current games theory, it generates far lesser equilibriums and normally generates only a unique equilibrium. It also resolves inconsistencies in equilibrium results by different solution concepts in current games theory.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 37969.
Date of creation: 15 Dec 2011
Date of revision: 06 Apr 2012
new equilibrium concept; iterative conjectures; convergence; Bayesian decision theory; Schelling point;
Find related papers by JEL classification:
- D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations
- D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
- C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-04-17 (All new papers)
- NEP-CTA-2012-04-17 (Contract Theory & Applications)
- NEP-EVO-2012-04-17 (Evolutionary Economics)
- NEP-GTH-2012-04-17 (Game Theory)
- NEP-HPE-2012-04-17 (History & Philosophy of Economics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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- Joseph B. Kadane & Patrick D. Larkey, 1982. "Subjective Probability and the Theory of Games," Management Science, INFORMS, INFORMS, vol. 28(2), pages 113-120, February.
- Joseph B. Kadane & Patrick D. Larkey, 1982. "Reply to Professor Harsanyi," Management Science, INFORMS, INFORMS, vol. 28(2), pages 124-124, February.
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