Prudent Rationalizability in Generalized Extensive-form Games with Unawareness

Heifetz, Aviad; Meier, Martin and Schipper, Burkhard C. (2021) Prudent Rationalizability in Generalized Extensive-form Games with Unawareness. The B.E. Journal of Theoretical Economics, 21 (2), pp. 525-556.

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We define a cautious version of extensive-form rationalizability for generalized extensive-form games with unawareness that we call prudent rationalizability. It is an extensive-form analog of iterated admissibility. In each round of the procedure, for each tree and each information set of a player a surviving strategy of hers is required to be rational vis-a-vis a belief system with a full-support belief on the opponents' previously surviving strategies that reach that information set. We demonstrate the applicability of prudent rationalizability. In games of disclosure of verifiable information, we show that prudent rationalizability yields unraveling under full awareness but unraveling might fail under unawareness. We compare prudent rationalizability to extensive-form rationalizability. We show that prudent rationalizability may not refine extensive-form rationalizability strategies but conjecture that the paths induced by prudent rationalizable strategy profiles (weakly) refine the set of paths induced by extensive-form rationalizable strategies.

Item Type: Article in Academic Journal
Additional Information (public): Funding Source: Open University of Israel Award identifier / Grant number: 46106 Funding Source: National Science Foundation Award identifier / Grant number: SES-0647811 Funding Source: Spanish Ministerio de Educacion y Ciencia via a Ramon y Cajal Fellowship (IAE-CSIC) Award identifier / Grant number: SEJ 2006-02079
Keywords: caution; extensive-form rationalizability; unawareness; disclosure; verifiable information; persuasion games; iterated admissibility; common strong cautious belief in rationality
Research Units: Current Research Groups > Macroeconomics and Business Cycles
Date Deposited: 02 Jun 2020 12:32
Last Modified: 06 Jul 2021 07:42
DOI: 10.1515/bejte-2020-2013
ISSN: 2194-6124

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