Economics at your fingertips  

Heterogeneously Perceived Incentives in Dynamic Environments: Rationalization, Robustness and Unique Selections

Evan Piermont and Peio Zuazo-Garin

Papers from

Abstract: In dynamic settings each economic agent's choices can be revealing of her private information. This elicitation via the rationalization of observable behavior depends each agent's perception of which payoff-relevant contingencies other agents persistently deem as impossible. We formalize the potential heterogeneity of these perceptions as disagreements at higher-orders about the set of payoff states of a dynamic game. We find that apparently negligible disagreements greatly affect how agents interpret information and assess the optimality of subsequent behavior: When knowledge of the state space is only 'almost common', strategic uncertainty may be greater when choices are rationalized than when they are not--forward and backward induction predictions, respectively, and while backward induction predictions are robust to small disagreements about the state space, forward induction predictions are not. We also prove that forward induction predictions always admit unique selections a la Weinstein and Yildiz (2007) (also for spaces not satisfying richness) and backward induction predictions do not.

Date: 2021-05
New Economics Papers: this item is included in nep-gth and nep-mic
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link) Latest version (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link:

Access Statistics for this paper

More papers in Papers from
Bibliographic data for series maintained by arXiv administrators ().

Page updated 2022-06-12
Handle: RePEc:arx:papers:2105.06772