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On the strategic impact of an event under non-common priors

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  • Oyama, Daisuke
  • Tercieux, Olivier

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.

Suggested Citation

  • Oyama, Daisuke & Tercieux, Olivier, 2012. "On the strategic impact of an event under non-common priors," Games and Economic Behavior, Elsevier, vol. 74(1), pages 321-331.
    • Handle: RePEc:eee:gamebe:v:74:y:2012:i:1:p:321-331
    DOI: 10.1016/j.geb.2011.06.003
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    1. Oyama, Daisuke & Tercieux, Olivier, 2010. "Robust equilibria under non-common priors," Journal of Economic Theory, Elsevier, vol. 145(2), pages 752-784, March.
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    Cited by:

    1. Oyama, Daisuke & Tercieux, Olivier, 2012. "On the strategic impact of an event under non-common priors," Games and Economic Behavior, Elsevier, vol. 74(1), pages 321-331.
    2. Mathevet, Laurent, 2014. "Beliefs and rationalizability in games with complementarities," Games and Economic Behavior, Elsevier, vol. 85(C), pages 252-271.
    3. Oyama, Daisuke & Tercieux, Olivier, 2010. "Robust equilibria under non-common priors," Journal of Economic Theory, Elsevier, vol. 145(2), pages 752-784, March.
    4. Daisuke Oyama & Satoru Takahashi, 2020. "Generalized Belief Operator and Robustness in Binary‐Action Supermodular Games," Econometrica, Econometric Society, vol. 88(2), pages 693-726, March.
    5. Oyama, Daisuke & Takahashi, Satoru, 2015. "Contagion and uninvadability in local interaction games: The bilingual game and general supermodular games," Journal of Economic Theory, Elsevier, vol. 157(C), pages 100-127.

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    More about this item

    Keywords

    Common prior assumption; Higher order belief; Rationalizability; Contagion; Belief potential;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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