Robust multiplicity with a grain of naiveté

Aviad Heifetz () and Willemien Kets
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Aviad Heifetz: Department of Economics, Open University of Israel

Theoretical Economics, 2018, vol. 13, issue 1

Abstract: Rationalizability is a central concept in game theory. Since there may be many rationalizable strategies, applications commonly use refinements to obtain sharp predictions. In an important paper, Weinstein and Yildiz [2007] show that no refinement is robust to perturbations of high-order beliefs. We show that robust refinements do exist if we relax the assumption that all players are unlimited in their reasoning ability. In particular, for a class of models, every strict Bayesian-Nash equilibrium is robust. In these environments, a researcher interested in making sharp predictions can use refinements to select among the strict equilibria of the game, and these predictions will be robust.

Keywords: Robustness; games with incomplete information; rationalizability; finite depth of reasoning; higher-order beliefs; level-k models; global games; refinements (search for similar items in EconPapers)
JEL-codes: C72 D8 (search for similar items in EconPapers)
Date: 2018-01-31
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Citations: View citations in EconPapers (9)

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