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Discovery and Equilibrium in Games with Unawareness

Burkhard Schipper ()

MPRA Paper from University Library of Munich, Germany

Abstract: Equilibrium notions for games with unawareness in the literature cannot be interpreted as steady-states of a learning process because players may discover novel actions during play. In this sense, many games with unawareness are ``self-destroying'' as a player's representation of the game may change after playing it once. We define discovery processes where at each state there is an extensive-form game with unawareness that together with the players' play determines the transition to possibly another extensive-form game with unawareness in which players are now aware of actions that they have discovered. A discovery process is rationalizable if players play extensive-form rationalizable strategies in each game with unawareness. We show that for any game with unawareness there is a rationalizable discovery process that leads to a self-confirming game that possesses a self-confirming equilibrium in extensive-form rationalizable strategies. This notion of equilibrium can be interpreted as steady-state of both a discovery and learning process.

Keywords: Self-confirming equilibrium; conjectural equilibrium; extensive-form rationalizability; unawareness; extensive-form games; equilibrium; learning; discovery (search for similar items in EconPapers)
JEL-codes: C72 D83 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-gth, nep-hpe and nep-mic
Date: 2018-04
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