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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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  1. Ronald Fagin & John Geanakoplos & Joseph Y. Halpern & Moshe Y. Vardi, 1999. "The Hierarchical Approach to Modeling Knowledge and Common Knowledge," Cowles Foundation Discussion Papers 1213, Cowles Foundation for Research in Economics, Yale University.
  2. Epstein, L.G., 1999. "Are Probabilities Used in Markets?," RCER Working Papers 464, University of Rochester - Center for Economic Research (RCER).
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  4. Mark J. Machina & David Schmeidler, 1990. "A More Robust Definition of Subjective Probability," Discussion Paper Serie A 306, University of Bonn, Germany.
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  7. Robert J. Aumann, 2010. "Correlated Equilibrium as an expression of Bayesian Rationality," Levine's Working Paper Archive 661465000000000377, David K. Levine.
  8. D. B. Bernheim, 2010. "Rationalizable Strategic Behavior," Levine's Working Paper Archive 661465000000000381, David K. Levine.
  9. Epstein, Larry G & Wang, Tan, 1996. ""Beliefs about Beliefs" without Probabilities," Econometrica, Econometric Society, vol. 64(6), pages 1343-73, November.
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  25. Geanakoplos, John, 1994. "Common knowledge," Handbook of Game Theory with Economic Applications, in: R.J. Aumann & S. Hart (ed.), Handbook of Game Theory with Economic Applications, edition 1, volume 2, chapter 40, pages 1437-1496 Elsevier.
  26. Basu, K. & Weibull, J., 1990. "Strategy Subsets Closed Under Rational Behavior," Papers 62, Princeton, Woodrow Wilson School - Discussion Paper.
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  29. Greenberg, Joseph & Monderer, Dov & Shitovitz, Benyamin, 1996. "Multistage Situations," Econometrica, Econometric Society, vol. 64(6), pages 1415-37, November.
  30. Robert J. Aumann, 1999. "Interactive epistemology I: Knowledge," International Journal of Game Theory, Springer, vol. 28(3), pages 263-300.
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