The Bayesian Foundations of solution concepts of games

Sergio Werlang and Tommy Chin-Chiu Tan

No 111, FGV EPGE Economics Working Papers (Ensaios Economicos da EPGE) from EPGE Brazilian School of Economics and Finance - FGV EPGE (Brazil)

Abstract: We transform a non co-operati ve game into a -Bayesian decision problem for each player where the uncertainty faced by a player is the strategy choices of the other players, the pr iors of other players on the choice of other players, the priors over priors and so on.We provide a complete characterization between the extent of knowledge about the rationality of players and their ability to successfulIy eliminate strategies which are not best responses. This paper therefore provides the informational foundations of iteratively unàominated strategies and rationalizable strategic behavior (Bernheim (1984) and Pearce (1984». Moreover, sufficient condi tions are also found for Nash equilibrium behavior. We also provide Aumann's (1985) results on correlated equilibria .

Date: 1987
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Journal Article: The Bayesian foundations of solution concepts of games (1988)
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