 Beliefs and rationalizability in games with complementaritiesGames and Economic Behavior, 2014, vol. 85, issue C, 252-271 Abstract: We propose two characteristics of beliefs and study their role in shaping the set of rationalizable strategy profiles in games with incomplete information. The first characteristic, type-sensitivity, is related to how informative a player thinks his type is. The second characteristic, optimism, is related to how “favorable” a player expects the outcome of the game to be. The paper has two main results: the first result provides an upper bound on the size of the set of rationalizable strategy profiles; the second gives a lower bound on the change of location of this set. These bounds are explicit expressions that involve type-sensitivity, optimism, and payoff characteristics. Our results generalize and clarify the well-known uniqueness result of global games (Carlsson and van Damme, 1993). They also imply new uniqueness results and allow us to study rationalizability in new environments. We provide applications to supermodular mechanism design (Mathevet, 2010b) and information processing errors. Keywords: Complementarities; Rationalizability; Beliefs; Type-sensitivity; Optimism; Global games; Equilibrium uniqueness (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:gamebe:v:85:y:2014:i:c:p:252-271 DOI: 10.1016/j.geb.2014.02.005 Access Statistics for this article Games and Economic Behavior is currently edited by E. Kalai More articles in Games and Economic Behavior from Elsevier |
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