Critical Types

Jeffrey Ely and Marcin Pęski

The Review of Economic Studies, 2011, vol. 78, issue 3, 907-937

Abstract: How can we know in advance whether simplifying assumptions about beliefs will make a difference in the conclusions of game-theoretic models? We define critical types to be types whose rationalizable correspondence is sensitive to assumptions about arbitrarily high-order beliefs. We show that a type is critical if and only if it exhibits common belief in some non-trivial event. We use this characterization to show that all types in commonly used type spaces are critical. On the other hand, we show that regular types (types that are not critical) are generic, although perhaps inconvenient to use in applications. Copyright 2011, Oxford University Press.

Date: 2011
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Working Paper: Critical Types (2008)
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