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Proper Rationalizability and Belief Revision in Dynamic Games

  • Perea Andrés

    (METEOR)

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    In this paper we develop an epistemic model for dynamic games in which players may revise their beliefs about the opponents'' preferences (including the opponents'' utility functions) as the game proceeds. Within this framework, we propose a rationalizability concept that is based upon the following three principles: (1) at every instance of the game, a player should believe that his opponents are carrying out optimal strategies, (2) a player should only revise his belief about an opponent''s relative ranking of two strategies if he is certain that the opponent has decided not to choose one of these strategies, and (3) the players'' initial beliefs about the opponents'' utility functions should agree on a given profile u of utility functions. Common belief about these events leads to the concept of persistent rationalizability for the profile u of utility functions. It is shown that for a given profile u of utility functions, every properly rationalizable strategy for ``types with non-increasing type supports'''' is a persistently rationalizable strategy for u. This result implies that persistently rationalizable strategies always exist for all game trees and all profiles of utility functions.

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    File URL: http://digitalarchive.maastrichtuniversity.nl/fedora/objects/guid:5fd06b3b-80ca-40fe-b7d4-921ef531551f/datastreams/ASSET1/content
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    Paper provided by Maastricht University, Maastricht Research School of Economics of Technology and Organization (METEOR) in its series Research Memorandum with number 048.

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    Date of creation: 2003
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    Handle: RePEc:unm:umamet:2003048
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    1. Frank Schuhmacher, 1999. "Proper rationalizability and backward induction," International Journal of Game Theory, Springer, vol. 28(4), pages 599-615.
    2. 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.
    3. Zauner, Klaus G., 2002. "The existence of equilibrium in games with randomly perturbed payoffs and applications to experimental economics," Mathematical Social Sciences, Elsevier, vol. 44(1), pages 115-120, September.
    4. Blume, Lawrence & Brandenburger, Adam & Dekel, Eddie, 1991. "Lexicographic Probabilities and Equilibrium Refinements," Econometrica, Econometric Society, vol. 59(1), pages 81-98, January.
    5. Kreps, David M & Wilson, Robert, 1982. "Sequential Equilibria," Econometrica, Econometric Society, vol. 50(4), pages 863-94, July.
    6. 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..
    7. Levine, David & Kreps, David & Fudenberg, Drew, 1988. "On the Robustness of Equilibrium Refinements," Scholarly Articles 3350444, Harvard University Department of Economics.
    8. E. Kohlberg & J.-F. Mertens, 1998. "On the Strategic Stability of Equilibria," Levine's Working Paper Archive 445, David K. Levine.
    9. Pearce, David G, 1984. "Rationalizable Strategic Behavior and the Problem of Perfection," Econometrica, Econometric Society, vol. 52(4), pages 1029-50, July.
    10. van Damme, E.E.C., 1984. "A relation between perfect equilibria in extensive form games and proper equilibria in normal form games," Other publications TiSEM 3734d89e-fd5c-4c80-a230-5, Tilburg University, School of Economics and Management.
    11. Philip J. Reny, 1992. "Rationality in Extensive-Form Games," Journal of Economic Perspectives, American Economic Association, vol. 6(4), pages 103-118, Fall.
    12. Elmes Susan & Reny Philip J., 1994. "On the Strategic Equivalence of Extensive Form Games," Journal of Economic Theory, Elsevier, vol. 62(1), pages 1-23, February.
    13. Epstein, Larry G & Wang, Tan, 1996. ""Beliefs about Beliefs" without Probabilities," Econometrica, Econometric Society, vol. 64(6), pages 1343-73, November.
    14. Battigalli, Pierpaolo, 1997. "On Rationalizability in Extensive Games," Journal of Economic Theory, Elsevier, vol. 74(1), pages 40-61, May.
    15. Perea Andrés, 2003. "Rationalizability and Minimal Complexity in Dynamic Games," Research Memorandum 047, Maastricht University, Maastricht Research School of Economics of Technology and Organization (METEOR).
    16. Battigalli, Pierpaolo, 1996. "Strategic Independence and Perfect Bayesian Equilibria," Journal of Economic Theory, Elsevier, vol. 70(1), pages 201-234, July.
    17. Battigalli, Pierpaolo & Siniscalchi, Marciano, 2002. "Strong Belief and Forward Induction Reasoning," Journal of Economic Theory, Elsevier, vol. 106(2), pages 356-391, October.
    18. Rubinstein, Ariel, 1991. "Comments on the Interpretation of Game Theory," Econometrica, Econometric Society, vol. 59(4), pages 909-24, July.
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