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Depth of Reasoning and Higher Order Beliefs

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  • Tomasz Strzalecki

Abstract

As demonstrated by the email game of Rubinstein (1989), the predictions of the standard equilibrium models of game theory are sensitive to assumptions about the fine details of the higher order beliefs. This paper shows that models of bounded depth of reasoning based on level-k thinking or cognitive hierarchy make predictions that are independent of the tail assumptions on the higher order beliefs. In addition to this finding, the tools developed in this paper o er a new direction for the analysis of models of bounded depth of reasoning and their applications to various economic settings. (JEL C72, D03)

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  • Tomasz Strzalecki, "undated". "Depth of Reasoning and Higher Order Beliefs," Working Paper 8334, Harvard University OpenScholar.
  • Handle: RePEc:qsh:wpaper:8334
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Heifetz, Aviad & Kets, Willemien, 2018. "Robust multiplicity with a grain of naiveté," Theoretical Economics, Econometric Society, vol. 13(1), January.
    2. Vincent P. Crawford & Miguel A. Costa-Gomes & Nagore Iriberri, 2013. "Structural Models of Nonequilibrium Strategic Thinking: Theory, Evidence, and Applications," Journal of Economic Literature, American Economic Association, vol. 51(1), pages 5-62, March.
    3. Larbi Alaoui & Antonio Penta, 2016. "Endogenous Depth of Reasoning," Review of Economic Studies, Oxford University Press, vol. 83(4), pages 1297-1333.
    4. Davide Cianciaruso & Fabrizio Germano, 2011. "Quotient Spaces of Boundedly Rational Types," Discussion Papers 1539, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
    5. Vincent P. Crawford & Miguel A. Costa-Gomes & Nagore Iriberri, 2010. "Strategic Thinking," Levine's Working Paper Archive 661465000000001148, David K. Levine.
    6. Agranov, Marina & Potamites, Elizabeth & Schotter, Andrew & Tergiman, Chloe, 2012. "Beliefs and endogenous cognitive levels: An experimental study," Games and Economic Behavior, Elsevier, vol. 75(2), pages 449-463.
    7. Kneeland, Terri, 2016. "Coordination under limited depth of reasoning," Games and Economic Behavior, Elsevier, vol. 96(C), pages 49-64.
    8. Külpmann, Philipp & Khantadze, Davit, 2016. "Identifying the reasons for coordination failure in a laboratory experiment," Center for Mathematical Economics Working Papers 567, Center for Mathematical Economics, Bielefeld University.
    9. repec:eee:matsoc:v:90:y:2017:i:c:p:191-207 is not listed on IDEAS
    10. Willemien Kets, 2014. "Finite Depth of Reasoning and Equilibrium Play in Games with Incomplete Information," Discussion Papers 1569, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
    11. Kota Murayama, 2015. "Robust Predictions under Finite Depth of Reasoning," Discussion Paper Series DP2015-28, Research Institute for Economics & Business Administration, Kobe University.
    12. Larbi Alaoui & Antonio Penta, 2017. "Reasoning about Others’ Reasoning," Working Papers 1003, Barcelona Graduate School of Economics.
    13. Nagel, Rosemarie & Bühren, Christoph & Frank, Björn, 2017. "Inspired and inspiring: Hervé Moulin and the discovery of the beauty contest game," Mathematical Social Sciences, Elsevier, vol. 90(C), pages 191-207.
    14. Larbi Alaoui & Antonio Penta, 2017. "Reasoning about others’ reasoning," Economics Working Papers 1587, Department of Economics and Business, Universitat Pompeu Fabra.
    15. Yildiz, Muhamet, 2015. "Invariance to representation of information," Games and Economic Behavior, Elsevier, vol. 94(C), pages 142-156.
    16. Kneeland, Terri, 2017. "Mechanism design with level-k types: Theory and an application to bilateral trade," Discussion Papers, Research Unit: Economics of Change SP II 2017-303, Social Science Research Center Berlin (WZB).
    17. Chen, Yi-Chun & Xiong, Siyang, 2013. "The e-mail game phenomenon," Games and Economic Behavior, Elsevier, vol. 80(C), pages 147-156.
    18. Trushin, Eshref & Ugur, Mehmet, 2018. "Ecosystem complexity, firm learning and survival: UK evidence on intra-industry age and size diversity as exit hazards," Greenwich Papers in Political Economy 19095, University of Greenwich, Greenwich Political Economy Research Centre.
    19. Dietmar Fehr & Steffen Huck, 2016. "Who knows it is a game? On strategic awareness and cognitive ability," Experimental Economics, Springer;Economic Science Association, vol. 19(4), pages 713-726, December.
    20. Willemien Kets, 2012. "Bounded Reasoning and Higher-Order Uncertainty," Discussion Papers 1547, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
    21. Aviad Heifetz & Willemien Kets, 2012. "All Types Naive and Canny," Discussion Papers 1550, Northwestern University, Center for Mathematical Studies in Economics and Management Science.

    More about this item

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles

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