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Payoff Information and Self-Confirming Equilibrium

  • Eddie Dekel
  • Drew Fudenberg
  • David K. Levine

In a self-confirming equilibrium, each player correctly forecasts the actions that opponents will take along the equilibrium path, but may be mistaken about the way that opponents would respond to deviations. This models a steady state of a learning process in which players observe actions played by their opponents, rather than a complete specification of their strategies. Consequently, players need not receive evidence that their forecasts of off-path play are incorrect. In practice, players understand that opponents are rational and have some information about their opponents payoffs. This paper develops a refinement of self-confirming equilibrium that incorporates the effects of such information. We show that this concept is robust. We also discuss its relationship to other concepts. In particular, we show that it is closely connected to assuming almost common certainty of payoffs in an epistemic model with independent beliefs.

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Paper provided by David K. Levine in its series Levine's Working Paper Archive with number 172.

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Date of creation: 24 Jan 1999
Date of revision:
Handle: RePEc:cla:levarc:172
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  1. E. Dekel & D. Fudenberg, 2010. "Rational Behavior with Payoff Uncertainty," Levine's Working Paper Archive 379, David K. Levine.
  2. Fudenberg, Drew & Levine, David K, 1993. "Self-Confirming Equilibrium," Econometrica, Econometric Society, vol. 61(3), pages 523-45, May.
  3. Drew Fudenberg & David Kreps & David K. Levine, 1988. "On the Robustness of Equilibrium Refinements," Levine's Working Paper Archive 227, David K. Levine.
  4. Costa-Gomes, Miguel & Crawford, Vincent P. & Broseta, Bruno, 1998. "Cognition and Behavior in Normal-Form Games: An Experimental Study," University of California at San Diego, Economics Working Paper Series qt1vn4h7x5, Department of Economics, UC San Diego.
  5. Monderer, Dov & Samet, Dov, 1989. "Approximating common knowledge with common beliefs," Games and Economic Behavior, Elsevier, vol. 1(2), pages 170-190, June.
  6. Kreps, David M & Wilson, Robert, 1982. "Sequential Equilibria," Econometrica, Econometric Society, vol. 50(4), pages 863-94, July.
  7. D. B. Bernheim, 2010. "Rationalizable Strategic Behavior," Levine's Working Paper Archive 661465000000000381, David K. Levine.
  8. Drew Fudenberg & Jean Tirole, 1991. "Game Theory," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262061414, June.
  9. Philip J. Reny, 1992. "Rationality in Extensive-Form Games," Journal of Economic Perspectives, American Economic Association, vol. 6(4), pages 103-118, Fall.
  10. P. Reny, 2010. "Common Belief and the Theory of Games with Perfect Information," Levine's Working Paper Archive 386, David K. Levine.
  11. Battigalli, Pierpaolo, 2003. "Rationalizability in infinite, dynamic games with incomplete information," Research in Economics, Elsevier, vol. 57(1), pages 1-38, March.
  12. Tan, Tommy Chin-Chiu & da Costa Werlang, Sergio Ribeiro, 1988. "The Bayesian foundations of solution concepts of games," Journal of Economic Theory, Elsevier, vol. 45(2), pages 370-391, August.
  13. Blume, Lawrence E & Zame, William R, 1994. "The Algebraic Geometry of Perfect and Sequential Equilibrium," Econometrica, Econometric Society, vol. 62(4), pages 783-94, July.
  14. Kaushik Basu, 2010. "Strategic Irrationality in Extensive Games," Levine's Working Paper Archive 375, David K. Levine.
  15. Gul, Faruk, 1996. "Rationality and Coherent Theories of Strategic Behavior," Journal of Economic Theory, Elsevier, vol. 70(1), pages 1-31, July.
  16. A. Rubinstein & A. Wolinsky, 2010. "Rationalizable Conjectural Equilibrium: Between Nash and Rationalizability," Levine's Working Paper Archive 369, David K. Levine.
  17. T. Börgers, 2010. "Weak Dominance and Approximate Common Knowledge," Levine's Working Paper Archive 378, David K. Levine.
  18. D. Fudenberg & D. M. Kreps, 2010. "Learning in Extensive Games, I: Self-Confirming Equilibrium," Levine's Working Paper Archive 382, David K. Levine.
  19. D. Pearce, 2010. "Rationalizable Strategic Behavior and the Problem of Perfection," Levine's Working Paper Archive 523, David K. Levine.
  20. repec:oup:restud:v:64:y:1997:i:1:p:23-46 is not listed on IDEAS
  21. Pearce, David G, 1984. "Rationalizable Strategic Behavior and the Problem of Perfection," Econometrica, Econometric Society, vol. 52(4), pages 1029-50, July.
  22. Fudenberg, Drew & Levine, David K, 1993. "Steady State Learning and Nash Equilibrium," Econometrica, Econometric Society, vol. 61(3), pages 547-73, May.
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