Paper #1326

Título:

Approximate knowledge of rationality and correlated equilibria

Autores:

Fabrizio Germano y Peio Zuazo-Garin

Data:

Junio 2012

Resumen:

We extend Aumann's [3] theorem, deriving correlated equilibria as a consequence of common priors and common knowledge of rationality, by explicitly allowing for non-rational behavior. We replace the assumption of common knowledge of rationality with a substantially weaker one, joint p-belief of rationality, where agents believe the other agents are rational with probabilities p = (pi)i?I or more. We show that behavior in this case constitutes a type of correlated equilibrium satisfying certain p-belief constraints, and that it varies continuously in the parameters p and, for p sufficiently close to one, with high probability is supported on strategies that survive the iterated elimination of strictly dominated strategies. Finally, we extend the analysis to characterizing rational expectations of interim types, to games of incomplete information, as well as to the case of non-common priors.

Palabras clave:

Approximate common knowledge, bounded rationality, p-rational belief system, correlated equilibrium, incomplete information, non-cooperative game.

Códigos JEL:

C72, D82, D83

Área de investigación:

Microeconomía

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