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Perfect Sequential Reciprocity and Dynamic Consistency

  • Penta, Antonio

Dufwenberg and Kirchsteiger�s (2004) extends Rabin�s (1993) theory of reciprocity in a dynamic sense, introducing a rule of revision for player�s beliefs. The Sequential Reciprocity Equilibrium [SRE] they define can be dynamically inconsistent. In this article it is argued that such dynamic inconsistency is not intrinsically related to issues of reciprocity, but rather to the particular way the beliefs�updating process is modeled. A refinement of the SRE, which is both dynamically consistent and, it is argued, more sound to assumptions usually made in the literature of information economics and philosophy, is proposed.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 10261.

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Date of creation: Jun 2004
Date of revision: Sep 2007
Handle: RePEc:pra:mprapa:10261
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  1. Pierpaolo Battigalli & Martin Dufwenberg, 2005. "Dynamic Psychological Games," Levine's Bibliography 784828000000000046, UCLA Department of Economics.
  2. Dufwenberg, M. & Kirchsteiger, G., 1998. "A Theory of Sequential Reciprocity," Discussion Paper 1998-37, Tilburg University, Center for Economic Research.
  3. Lawrence Blume & Adam Brandenburger & Eddie Dekel, 2014. "Lexicographic Probabilities and Choice Under Uncertainty," World Scientific Book Chapters, in: The Language of Game Theory Putting Epistemics into the Mathematics of Games, chapter 6, pages 137-160 World Scientific Publishing Co. Pte. Ltd..
  4. Pierpaolo Battigali & Giacomo Bonanno, . "Recent Results On Belief, Knowledge And The Epistemic Foundations Of Game Theory," Department of Economics 98-14, California Davis - Department of Economics.
  5. Pierpaolo Battigalli, . "Hierarchies of Conditional Beliefs and Interactive Epistemology in Dynamic Games," Working Papers 111, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
  6. Blume, Lawrence & Brandenburger, Adam & Dekel, Eddie, 1991. "Lexicographic Probabilities and Equilibrium Refinements," Econometrica, Econometric Society, vol. 59(1), pages 81-98, January.
  7. Jon Elster, 1998. "Emotions and Economic Theory," Journal of Economic Literature, American Economic Association, vol. 36(1), pages 47-74, March.
  8. Stalnaker, Robert, 1998. "Belief revision in games: forward and backward induction1," Mathematical Social Sciences, Elsevier, vol. 36(1), pages 31-56, July.
  9. Shane Frederick & George Loewenstein & Ted O'Donoghue, 2002. "Time Discounting and Time Preference: A Critical Review," Journal of Economic Literature, American Economic Association, vol. 40(2), pages 351-401, June.
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