Correlated Equilibrium via Hierarchies of Beliefs

Songzi Du

MPRA Paper from University Library of Munich, Germany

Abstract: We study a model of correlated equilibrium where every player takes actions based on his hierarchies of beliefs (belief on what other players will do, on what other players believe about others will do, etc.) intrinsic to the game. Our model does away with messages from outside mediator that are usually assumed in the interpretation of correlated equilibrium. We characterize in every finite, complete information game the exact sets of correlated equilibria (both subjective and objective) that can be obtained conditioning on hierarchies of beliefs; the characterizations rely on a novel iterated deletion procedure. If the procedure ends after k rounds of deletion for a correlated equilibrium obtained from hierarchies of beliefs, then players in the equilibrium need to reason to at most k-th order beliefs. Further conceptual and geometric properties of the characterizations are studied.

Keywords: game theory; correlated equilibrium; higher order beliefs; purification; intrinsic correlation (search for similar items in EconPapers)
JEL-codes: C72 D80 (search for similar items in EconPapers)
Date: 2009-08-15
New Economics Papers: this item is included in nep-gth, nep-hpe and nep-mic
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:16926

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