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Payoff Information and Self-Confirming Equilibrium

  • Levine, David
  • Dekel, Eddie
  • Fudenberg, Drew

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 paper develops a refinement of self-confirming equilibrium in which players use information about opponents' payoffs in forming beliefs about the way that opponents play off of the equilibrium path. We show that this concept is robust to payoff uncertainty. We also discuss its relationship to other concepts and show that it is closely related to assuming almost common certainty of payoffs in an epistemic model with independent beliefs.

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File URL: http://dash.harvard.edu/bitstream/handle/1/3200614/fudenberg_payoff.pdf
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Paper provided by Harvard University Department of Economics in its series Scholarly Articles with number 3200614.

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Date of creation: 1999
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Publication status: Published in Journal of Economic Theory
Handle: RePEc:hrv:faseco:3200614
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  1. Elchanan Ben-Porath, 1997. "Rationality, Nash Equilibrium and Backwards Induction in Perfect-Information Games," Review of Economic Studies, Oxford University Press, vol. 64(1), pages 23-46.
  2. 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.
  3. Kaushik Basu, 2010. "Strategic Irrationality in Extensive Games," Levine's Working Paper Archive 375, David K. Levine.
  4. Drew Fudenberg & Eddie Dekel, 1987. "Rational Behavior with Payoff Uncertainty," Working papers 471, Massachusetts Institute of Technology (MIT), Department of Economics.
  5. Fudenberg, D. & Levine, D.K., 1991. "Self-Confirming Equilibrium ," Working papers 581, Massachusetts Institute of Technology (MIT), Department of Economics.
  6. Fudenberg, Drew & Kreps, David M. & Levine, David K., 1988. "On the robustness of equilibrium refinements," Journal of Economic Theory, Elsevier, vol. 44(2), pages 354-380, April.
  7. D. B. Bernheim, 2010. "Rationalizable Strategic Behavior," Levine's Working Paper Archive 661465000000000381, David K. Levine.
  8. A. Rubinstein & A. Wolinsky, 2010. "Rationalizable Conjectural Equilibrium: Between Nash and Rationalizability," Levine's Working Paper Archive 369, David K. Levine.
  9. Gul, Faruk, 1996. "Rationality and Coherent Theories of Strategic Behavior," Journal of Economic Theory, Elsevier, vol. 70(1), pages 1-31, July.
  10. Reny Philip J., 1993. "Common Belief and the Theory of Games with Perfect Information," Journal of Economic Theory, Elsevier, vol. 59(2), pages 257-274, April.
  11. Fudenberg, Drew & Levine, David K, 1993. "Steady State Learning and Nash Equilibrium," Econometrica, Econometric Society, vol. 61(3), pages 547-73, May.
  12. Lawrence E. Blume & William R. Zame, 1993. "The Algebraic Geometry of Perfect and Sequential Equilibrium," Game Theory and Information 9309001, EconWPA.
  13. Battigalli, Pierpaolo, 2003. "Rationalizability in infinite, dynamic games with incomplete information," Research in Economics, Elsevier, vol. 57(1), pages 1-38, March.
  14. David M Kreps & Robert Wilson, 2003. "Sequential Equilibria," Levine's Working Paper Archive 618897000000000813, David K. Levine.
  15. 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.
  16. Pearce, David G, 1984. "Rationalizable Strategic Behavior and the Problem of Perfection," Econometrica, Econometric Society, vol. 52(4), pages 1029-50, July.
  17. Monderer, Dov & Samet, Dov, 1989. "Approximating common knowledge with common beliefs," Games and Economic Behavior, Elsevier, vol. 1(2), pages 170-190, June.
  18. Drew Fudenberg & Jean Tirole, 1991. "Game Theory," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262061414.
  19. T. Börgers, 2010. "Weak Dominance and Approximate Common Knowledge," Levine's Working Paper Archive 378, David K. Levine.
  20. Philip J. Reny, 1992. "Rationality in Extensive-Form Games," Journal of Economic Perspectives, American Economic Association, vol. 6(4), pages 103-118, Fall.
  21. D. Fudenberg & D. M. Kreps, 2010. "Learning in Extensive Games, I: Self-Confirming Equilibrium," Levine's Working Paper Archive 382, David K. Levine.
  22. D. Pearce, 2010. "Rationalizable Strategic Behavior and the Problem of Perfection," Levine's Working Paper Archive 523, David K. Levine.
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