Counterfactuals with Latent Information

Dirk Bergemann, Benjamin Brooks and Stephen Morris
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Benjamin Brooks: Dept. of Economics, University of Chicago

No 2162R3, Cowles Foundation Discussion Papers from Cowles Foundation for Research in Economics, Yale University

Abstract: We describe a methodology for making counterfactual predictions in settings where the information held by strategic agents is unknown. The analyst observes behavior assumed to be rationalized by a Bayesian model, in which agents maximize expected utility, given partial and differential information about payoff-relevant states of the world. A counterfactual prediction is desired about behavior in another strategic setting, under the hypothesis that the distribution of the state and agents’ information about the state are held fixed. When the data and the desired counterfactual prediction pertain to environments with finitely many states, players, and actions, the counterfactual prediction is described by finitely many linear inequalities, even though the latent parameter, the information structure, is infinite dimensional.

Keywords: Counterfactuals; Bayes correlated equilibrium; information structure; linear program (search for similar items in EconPapers)
JEL-codes: C72 D44 D82 D83 (search for similar items in EconPapers)
Pages: 59 pages
Date: 2019-02, Revised 2021-08
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Related works:
Journal Article: Counterfactuals with Latent Information (2022)
Working Paper: Counterfactuals with Latent Information (2021)
Working Paper: Counterfactuals with Latent Information (2021)
Working Paper: Counterfactuals with Latent Information (2019)
Working Paper: Counterfactuals with Latent Information (2019)
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