On the strategic impact of an event under non-common priors |
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Authors: | Daisuke Oyama Olivier Tercieux |
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Institution: | a Faculty of Economics, University of Tokyo, Hongo, Bunkyo-ku, Tokyo 113-0033, Japan b Paris School of Economics and CNRS, 48 Boulevard Jourdan, 75014 Paris, France |
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Abstract: | This paper studies the impact of a small probability event on strategic behavior in incomplete information games with non-common priors. It is shown that the global impact of a small probability event (i.e., its propensity to affect strategic behavior at all states in the state space) has an upper bound that is an increasing function of a measure of discrepancy from the common prior assumption. In particular, its global impact can be arbitrarily large under non-common priors, but is bounded from above under common priors. These results quantify the different implications common prior and non-common prior models have on the (infinite) hierarchies of beliefs. |
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Keywords: | C72 D82 |
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