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Rational expectations in games

Author

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  • AUMANN, Robert J.
  • DREZE, Jacques H.

Abstract

A player i's actions in a game are determined by her beliefs about other players; these depend on the game's real-life context, not only its formal description. Define a game situation as a game together with such beliefs; call the beliefs— and i's resulting expectation—rational if there is common knowledge of rationality and a common prior. In two-person zero-sum games, i's only rational expectation is the game’s value. In an arbitrary game G, we characterize i's rational expectations in terms of the correlated equilibria of the doubled game 2G in which each of i's strategies in G appears twice. (JEL C72, D83, D84)
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • AUMANN, Robert J. & DREZE, Jacques H., 2009. "Rational expectations in games," CORE Discussion Papers RP 2011, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  • Handle: RePEc:cor:louvrp:2011
    Note: In : American Economic Review, 98(1), 72-86, 2008
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    File URL: http://dx.doi.org/10.1257/aer.98.1.72
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    Cited by:

    1. Agastya, Murali & Slinko, Arkadii, 2015. "Dynamic choice in a complex world," Journal of Economic Theory, Elsevier, vol. 158(PA), pages 232-258.
    2. repec:taf:jecmet:v:24:y:2017:i:3:p:318-343 is not listed on IDEAS
    3. Khan, M. Ali & Rath, Kali P. & Sun, Yeneng & Yu, Haomiao, 2013. "Large games with a bio-social typology," Journal of Economic Theory, Elsevier, vol. 148(3), pages 1122-1149.
    4. Jacquemet, Nicolas & Koessler, Frédéric, 2013. "Using or hiding private information? An experimental study of zero-sum repeated games with incomplete information," Games and Economic Behavior, Elsevier, vol. 78(C), pages 103-120.
    5. Yoder, Jonathan K. & Ohler, Adrienne M. & Chouinard, Hayley H., 2014. "What floats your boat? Preference revelation from lotteries over complex goods," Journal of Environmental Economics and Management, Elsevier, vol. 67(3), pages 412-430.
    6. Itai Arieli, 2008. "Towards a Characterization of Rational Expectations," Levine's Bibliography 122247000000001891, UCLA Department of Economics.
    7. Guilhem Lecouteux, 2017. "Bayesian Game Theorists and Non-Bayesian Players," GREDEG Working Papers 2017-30, Groupe de REcherche en Droit, Economie, Gestion (GREDEG CNRS), University of Nice Sophia Antipolis, revised Jul 2018.
    8. Fabrizio Germano & Peio Zuazo-Garin, 2017. "Bounded rationality and correlated equilibria," International Journal of Game Theory, Springer;Game Theory Society, vol. 46(3), pages 595-629, August.
    9. Lauren Larrouy & Guilhem Lecouteux, 2017. "Mindreading and endogenous beliefs in games," Journal of Economic Methodology, Taylor & Francis Journals, vol. 24(3), pages 318-343, July.
    10. Francesco Bogliacino & Giorgio Rampa, 2012. "Quality risk aversion, conjectures, and new product diffusion," Journal of Evolutionary Economics, Springer, vol. 22(5), pages 1081-1115, November.
    11. repec:the:publsh:3423 is not listed on IDEAS
    12. Grant, Simon & Meneghel, Idione & Tourky, Rabee, 2016. "Savage games," Theoretical Economics, Econometric Society, vol. 11(2), May.
    13. Velu, C. & Iyer, S., 2008. "The Rationality of Irrationality for Managers: Returns- Based Beliefs and the Traveller’s Dilemma," Cambridge Working Papers in Economics 0826, Faculty of Economics, University of Cambridge.
    14. Lall Ramrattan & Michael Szenberg, 2012. "The impact of The General Theory on Economic Theory and the Development of Public Policies: A Nested Vision of Keynes’s Ideas with the Classical Vision through a Panoramic View of his Works," Chapters,in: Keynes’s General Theory, chapter 8 Edward Elgar Publishing.
    15. repec:eee:gamebe:v:107:y:2018:i:c:p:153-181 is not listed on IDEAS
    16. Du, Songzi, 2009. "Correlated Equilibrium via Hierarchies of Beliefs," MPRA Paper 16926, University Library of Munich, Germany.
    17. Hayo, Bernd & Vollan, Björn, 2012. "Group interaction, heterogeneity, rules, and co-operative behaviour: Evidence from a common-pool resource experiment in South Africa and Namibia," Journal of Economic Behavior & Organization, Elsevier, vol. 81(1), pages 9-28.
    18. Pier Luigi Sacco & Alessandro Crociata, 2013. "A Conceptual Regulatory Framework for the Design and Evaluation of Complex, Participative Cultural Planning Strategies," International Journal of Urban and Regional Research, Wiley Blackwell, vol. 37(5), pages 1688-1706, September.
    19. Hellman, Ziv, 2013. "Weakly rational expectations," Journal of Mathematical Economics, Elsevier, vol. 49(6), pages 496-500.
    20. Itai Arieli, 2008. "Towards a Characterization of Rational Expectations," Discussion Paper Series dp475, The Federmann Center for the Study of Rationality, the Hebrew University, Jerusalem.
    21. Binmore, Ken, 2015. "Rationality," Handbook of Game Theory with Economic Applications, Elsevier.
    22. Itai Arieli, 2008. "Towards a Characterization of Rational," Levine's Working Paper Archive 122247000000002431, David K. Levine.
    23. Velu, C. & Iyer, S., 2008. "Returns-Based Beliefs and The Prisoner’s Dilemma," Cambridge Working Papers in Economics 0854, Faculty of Economics, University of Cambridge.

    More about this item

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations

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