Sensitivity of equilibrium behavior to higher-order beliefs in nice games
We analyze “nice” games (where action spaces are compact intervals, utilities continuous and strictly concave in own action), which are used frequently in classical economic models. Without making any “richness” assumption, we characterize the sensitivity of any given Bayesian Nash equilibrium to hi...
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| Other Authors: | |
| Format: | Article |
| Language: | en_US |
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Elsevier
2015
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| Online Access: | http://hdl.handle.net/1721.1/98466 https://orcid.org/0000-0002-7637-7117 |
| _version_ | 1826197195784716288 |
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| author | Weinstein, Jonathan Yildiz, Muhamet |
| author2 | Massachusetts Institute of Technology. Department of Economics |
| author_facet | Massachusetts Institute of Technology. Department of Economics Weinstein, Jonathan Yildiz, Muhamet |
| author_sort | Weinstein, Jonathan |
| collection | MIT |
| description | We analyze “nice” games (where action spaces are compact intervals, utilities continuous and strictly concave in own action), which are used frequently in classical economic models. Without making any “richness” assumption, we characterize the sensitivity of any given Bayesian Nash equilibrium to higher-order beliefs. That is, for each type, we characterize the set of actions that can be played in equilibrium by some type whose lower-order beliefs are all as in the original type. We show that this set is given by a local version of interim correlated rationalizability. This allows us to characterize the robust predictions of a given model under arbitrary common knowledge restrictions. We apply our framework to a Cournot game with many players. There we show that we can never robustly rule out any production level below the monopoly production of each firm. |
| first_indexed | 2024-09-23T10:43:58Z |
| format | Article |
| id | mit-1721.1/98466 |
| institution | Massachusetts Institute of Technology |
| language | en_US |
| last_indexed | 2024-09-23T10:43:58Z |
| publishDate | 2015 |
| publisher | Elsevier |
| record_format | dspace |
| spelling | mit-1721.1/984662022-09-27T14:34:20Z Sensitivity of equilibrium behavior to higher-order beliefs in nice games Weinstein, Jonathan Yildiz, Muhamet Massachusetts Institute of Technology. Department of Economics Yildiz, Muhamet We analyze “nice” games (where action spaces are compact intervals, utilities continuous and strictly concave in own action), which are used frequently in classical economic models. Without making any “richness” assumption, we characterize the sensitivity of any given Bayesian Nash equilibrium to higher-order beliefs. That is, for each type, we characterize the set of actions that can be played in equilibrium by some type whose lower-order beliefs are all as in the original type. We show that this set is given by a local version of interim correlated rationalizability. This allows us to characterize the robust predictions of a given model under arbitrary common knowledge restrictions. We apply our framework to a Cournot game with many players. There we show that we can never robustly rule out any production level below the monopoly production of each firm. 2015-09-11T16:59:11Z 2015-09-11T16:59:11Z 2010-07 2009-04 Article http://purl.org/eprint/type/JournalArticle 08998256 1090-2473 http://hdl.handle.net/1721.1/98466 Weinstein, Jonathan, and Muhamet Yildiz. “Sensitivity of Equilibrium Behavior to Higher-Order Beliefs in Nice Games.” Games and Economic Behavior 72, no. 1 (May 2011): 288–300. https://orcid.org/0000-0002-7637-7117 en_US http://dx.doi.org/10.1016/j.geb.2010.07.003 Games and Economic Behavior Creative Commons Attribution-Noncommercial-NoDerivatives http://creativecommons.org/licenses/by-nc-nd/4.0/ application/pdf Elsevier MIT web domain |
| spellingShingle | Weinstein, Jonathan Yildiz, Muhamet Sensitivity of equilibrium behavior to higher-order beliefs in nice games |
| title | Sensitivity of equilibrium behavior to higher-order beliefs in nice games |
| title_full | Sensitivity of equilibrium behavior to higher-order beliefs in nice games |
| title_fullStr | Sensitivity of equilibrium behavior to higher-order beliefs in nice games |
| title_full_unstemmed | Sensitivity of equilibrium behavior to higher-order beliefs in nice games |
| title_short | Sensitivity of equilibrium behavior to higher-order beliefs in nice games |
| title_sort | sensitivity of equilibrium behavior to higher order beliefs in nice games |
| url | http://hdl.handle.net/1721.1/98466 https://orcid.org/0000-0002-7637-7117 |
| work_keys_str_mv | AT weinsteinjonathan sensitivityofequilibriumbehaviortohigherorderbeliefsinnicegames AT yildizmuhamet sensitivityofequilibriumbehaviortohigherorderbeliefsinnicegames |