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A Unified Approach to Information, Knowledge, and Stability

  • Xiao Luo
  • Yi-Chun Chen

Within the context of strategic interaction, we provide a unified framework for analyzing information, knowledge, and the "stable" pattern of behavior. We first study the related interactive epistemology and, in particular, show an equivalence theorem between a strictly dominated strategy and a never-best reply in terms of epistemic states. We then explore epistemic foundations behind the fascinating idea of stability due to J. von Neumann and O. Morgenstern. The major features of our approach are: (i)unlike the ad hoc semantic model of knowledge, the state space is constructed by Harsanyi’s types that are explicitly formulated by Epstein and Wang (Econometrica 64, 1996, 1343-1373); (ii)players may have general preferences, including subjective expected utility and non-expected utility; and (iii) players may be boundedly rational and have non-partitional information structures

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Paper provided by Econometric Society in its series Econometric Society 2004 Far Eastern Meetings with number 472.

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Date of creation: 11 Aug 2004
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Handle: RePEc:ecm:feam04:472
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