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Depth of reasoning and higher order beliefs

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  • Strzalecki, Tomasz

Abstract

As demonstrated by the email game of Rubinstein (1989), the predictions of the standard equilibrium models of game theory are sensitive to assumptions about the fine details of the higher order beliefs. This paper shows that models of bounded depth of reasoning based on level-k thinking or cognitive hierarchy make predictions that are independent of the tail assumptions on the higher order beliefs. The framework developed here provides a language that makes it possible to identify general conditions on depth of reasoning, instead of committing to a particular model such as level-k thinking or cognitive hierarchy.

Suggested Citation

  • Strzalecki, Tomasz, 2014. "Depth of reasoning and higher order beliefs," Journal of Economic Behavior & Organization, Elsevier, vol. 108(C), pages 108-122.
  • Handle: RePEc:eee:jeborg:v:108:y:2014:i:c:p:108-122
    DOI: 10.1016/j.jebo.2014.09.002
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    More about this item

    Keywords

    k-Level thinking; Email game; Equilibrium; Higher order beliefs;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles

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