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Admissibility and Event-Rationality

Paulo Barelli and Spyros Galanis

No 568, RCER Working Papers from University of Rochester - Center for Economic Research (RCER)

Abstract: We develop an approach to providing epistemic conditions for admissible behavior in games. Instead of using lexicographic beliefs to capture infinitely less likely conjectures, we postulate that players use tie-breaking sets to help decide among strategies that are outcome-equivalent given their conjectures. A player is event-rational if she best responds to a conjecture and uses a list of subsets of the other players' strategies to break ties among outcome-equivalent strategies. Using type spaces to capture interactive beliefs, we show that common belief of event-rationality (RCBER) implies that players play strategies in S1W, that is, admissible strategies that also survive iterated elimination of dominated strategies (Dekel and Fudenberg (1990)). We strengthen standard belief to validated belief and we show that event-rationality and common validated belief of event-rationality (RCvBER) implies that players play iterated admissible strategies (IA). We show that in complete, continuous and compact type structures, RCBER and RCvBER are nonempty, and hence we obtain epistemic criteria for SinfW and IA.

Pages: 39 pages
Date: 2011-10
New Economics Papers: this item is included in nep-gth, nep-mic and nep-upt
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Journal Article: Admissibility and event-rationality (2013) Downloads
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