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Utility proportional beliefs

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  • Christian Bach

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  • Andrés Perea

    ()

Abstract

In game theory, basic solution concepts often conflict with experimental findings or intuitive reasoning. This fact is possibly due to the requirement that zero probability is assigned to irrational choices in these concepts. Here, we introduce the epistemic notion of common belief in utility proportional beliefs which also attributes positive probability to irrational choices, restricted however by the natural postulate that the probabilities should be proportional to the utilities the respective choices generate. Besides, we propose a procedural characterization of our epistemic concept. With regards to experimental findings common belief in utility proportional beliefs fares well in explaining observed behavior. Copyright Springer-Verlag Berlin Heidelberg 2014

Suggested Citation

  • Christian Bach & Andrés Perea, 2014. "Utility proportional beliefs," International Journal of Game Theory, Springer;Game Theory Society, vol. 43(4), pages 881-902, November.
  • Handle: RePEc:spr:jogath:v:43:y:2014:i:4:p:881-902
    DOI: 10.1007/s00182-013-0409-3
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    References listed on IDEAS

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    1. Rosenthal, Robert W, 1989. "A Bounded-Rationality Approach to the Study of Noncooperative Games," International Journal of Game Theory, Springer;Game Theory Society, vol. 18(3), pages 273-291.
    2. Perea,Andrés, 2012. "Epistemic Game Theory," Cambridge Books, Cambridge University Press, number 9781107401396, April.
    3. Perea, Andrés, 2011. "An algorithm for proper rationalizability," Games and Economic Behavior, Elsevier, vol. 72(2), pages 510-525, June.
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    6. Bernheim, B Douglas, 1984. "Rationalizable Strategic Behavior," Econometrica, Econometric Society, vol. 52(4), pages 1007-1028, July.
    7. Perea,Andrés, 2012. "Epistemic Game Theory," Cambridge Books, Cambridge University Press, number 9781107008915, April.
    8. Jacob K. Goeree & Charles A. Holt, 2001. "Ten Little Treasures of Game Theory and Ten Intuitive Contradictions," American Economic Review, American Economic Association, vol. 91(5), pages 1402-1422, December.
    9. Frank Schuhmacher, 1999. "Proper rationalizability and backward induction," International Journal of Game Theory, Springer;Game Theory Society, vol. 28(4), pages 599-615.
    10. Pearce, David G, 1984. "Rationalizable Strategic Behavior and the Problem of Perfection," Econometrica, Econometric Society, vol. 52(4), pages 1029-1050, July.
    11. Tilman Becker & Michael Carter & Jörg Naeve, 2005. "Experts Playing the Traveler's Dilemma," Diskussionspapiere aus dem Institut für Volkswirtschaftslehre der Universität Hohenheim 252/2005, Department of Economics, University of Hohenheim, Germany.
    12. Basu, Kaushik, 1994. "The Traveler's Dilemma: Paradoxes of Rationality in Game Theory," American Economic Review, American Economic Association, vol. 84(2), pages 391-395, May.
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    1. repec:eee:matsoc:v:91:y:2018:i:c:p:6-16 is not listed on IDEAS

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