On the Strategic Impact of an Event under Non-Common Priors

Daisuke Oyama and Olivier Tercieux ()
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Olivier Tercieux: PSE - Paris-Jourdan Sciences Economiques - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - INRA - Institut National de la Recherche Agronomique - EHESS - École des hautes études en sciences sociales - ENPC - École nationale des ponts et chaussées - CNRS - Centre National de la Recherche Scientifique, PSE - Paris School of Economics - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École nationale des ponts et chaussées - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement

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Abstract: This paper studies the impact of a small probability event on strategic behavior in incomplete information games with non-common priors. It is shown that the global impact of a small probability event (i.e., its propensity to affect strategic behavior at all states in the state space) has an upper bound that is an increasing function of a measure of discrepancy from the common prior assumption. In particular, its global impact can be arbitrarily large under non-common priors, but is bounded from above under common priors. These results quantify the different implications common prior and non-common prior models have on the (infinite) hierarchies of beliefs.

Keywords: Common prior assumption; Higher order belief; Rationalizability; Contagion; Belief potential (search for similar items in EconPapers)
Date: 2012-01
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Citations: View citations in EconPapers (2)

Published in Games and Economic Behavior, 2012, 74 (1), pp.321-331. ⟨10.1016/j.geb.2011.06.003⟩

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Related works:
Journal Article: On the strategic impact of an event under non-common priors (2012)
Working Paper: On the Strategic Impact of an Event under Non-Common Priors (2012)
Working Paper: On the Strategic Impact of an Event under Non-Common Priors (2005)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:pseptp:halshs-00754605

DOI: 10.1016/j.geb.2011.06.003

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