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Dynamic consistency in incomplete information games with multiple priors

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  • Pahlke, Marieke

Abstract

This paper explores multi-stage incomplete information games with common ambiguous information about states or types and ambiguity averse players. We characterize a belief formation process that allows players to take their knowledge about the structure of the game into account. This process leads to subjective rectangular ex-ante belief sets for all players. We show that given these sets of beliefs, players behave dynamically consistent. Therefore, using our belief formation process, we can extend the concept of sequential equilibria to multi-stage ambiguous incomplete information games. Furthermore, we characterize assumption under which sequential rationality implies rectangularity.

Suggested Citation

  • Pahlke, Marieke, 2022. "Dynamic consistency in incomplete information games with multiple priors," Games and Economic Behavior, Elsevier, vol. 133(C), pages 85-108.
    • Handle: RePEc:eee:gamebe:v:133:y:2022:i:c:p:85-108
    DOI: 10.1016/j.geb.2022.02.004
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    Cited by:

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    2. Galanis, S. & Ioannou, C. & Kotronis, S., 2019. "Information Aggregation Under Ambiguity: Theory and Experimental Evidence," Working Papers 20/05, Department of Economics, City University London.
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    4. Spyros Galanis & Christos A. Ioannou & Stelios Kotronis, 2023. "Supplementary appendix to Information Aggregation Under Ambiguity: Theory and Experimental Evidence," Working Papers 2023_05, Durham University Business School.
    5. Gerrit Bauch & Frank Riedel, 2022. "The Texas Shootout under Uncertainty," Papers 2211.10089, arXiv.org.
    6. Gerrit Bauch, 2023. "Underreaction and dynamic inconsistency in communication games under noise," Papers 2311.12496, arXiv.org.

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    More about this item

    Keywords

    Sequential equilibrium; Ambiguity; Dynamic consistency; Multiple priors; Imprecise information;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness

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