An epistemic characterization of MACA

Xiao Luo and Ben Wang ()
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Ben Wang: National University of Singapore

Economic Theory, 2022, vol. 73, issue 4, No 7, 995-1024

Abstract: Abstract Greenberg et al. (Econ Theory 40:91–112, 2009. https://doi.org/10.1007/s00199-008-0349-5 ) offered a solution concept of a “mutually acceptable course of action” (MACA) for situations in which rational individuals with different beliefs and views of the world agree to a shared course of action. In this paper we investigate epistemic conditions for MACA, in terms of information, beliefs, and rationality. Within a semantic framework, we formulate and show, using the notion of “lexicographic probability system” (LPS) introduced by Blume et al. (Econometrica 59:61–79, 1991a), that MACA is the logical consequence of “perfect” rationality, common belief in “perfect” rationality, and correct mutual belief in agreement on the shared course of action. We also demonstrate how epistemic characterizations for “perfect” versions of solution concepts can be derived from our epistemic characterization for MACA, by varying the degree of completeness of the shared course of action.

Keywords: MACA; LPS; (perfect) rationality; Mutual belief; Common belief; Backward induction; Perfect equilibrium; Rationalizability; Self-confirming equilibrium; C70; C72 (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (1)

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DOI: 10.1007/s00199-021-01341-0

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