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Rationalization and Incomplete Information

  • P. Battigalli
  • M. Siniscalchi

We analyze a family of extensive-form solution procedures for games with incomplete information that do not require the specification of an epistemic type space a la Harsanyi, but can accommodate a (commonly known) collection of explicit restrictions D on first-order beliefs. For any fixed D we obtain a solution called D-rationalizability.In static games, D-rationalizability characterizes the set of outcomes (combinations of payoff types and strategies) that may occur in any Bayesian equilibrium model consistent with D; these are precisely the outcomes consistent with common certainty of rationality and of the restrictions D. Hence, our approach to the analysis of incomplete-information games is consistent with Harsanyi's, and it may be viewed as capturing the robust implications of Bayesian equilibrium analysis.In dynamic games, D-rationalizability yields a forward-induction refinement of this set of Bayesian equilibrium outcomes. Focusing on the restriction that first-order beliefs be consistent with a given distribution on terminal nodes, we obtain a refinement of self-confirming equilibrium. In signalling games, this refinement coincides with the Iterated Intuitive Criterion.

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Paper provided by David K. Levine in its series Princeton Economic Theory Working Papers with number 9817a118e65062903de7c3577d29be36.

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Date of creation: 02 Sep 2002
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Handle: RePEc:cla:princt:9817a118e65062903de7c3577d29be36
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  1. Battigalli, Pierpaolo & Siniscalchi, Marciano, 2003. "Rationalizable bidding in first-price auctions," Games and Economic Behavior, Elsevier, vol. 45(1), pages 38-72, October.
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  28. Battigalli, Pierpaolo & Siniscalchi, Marciano, 2002. "Strong Belief and Forward Induction Reasoning," Journal of Economic Theory, Elsevier, vol. 106(2), pages 356-391, October.
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