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Rationalizable conjectural equilibrium: A framework for robust predictions

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    (Stern School of Business, New York University)

Abstract

I introduce a new framework to study environments with both structural and strategic uncertainty, different from Harsanyi's (1967-8) `Bayesian games', that allows a researcher to test the robustness of Nash predictions while maintaining certain desirable restrictions on players' beliefs. The solution concept applied to this environment is rationalizable conjectural equilibrium (RCE), which integrates both learning from feedback (in the spirit of self-confirming equilibrium) and from introspection (in the spirit of rationalizability). I provide an epistemic definition of RCE and obtain a characterization in terms of a procedure that generalizes iterated deletion of strategies that are not a best response.

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  • ,, 2013. "Rationalizable conjectural equilibrium: A framework for robust predictions," Theoretical Economics, Econometric Society, vol. 8(2), May.
    • Handle: RePEc:the:publsh:928
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    Cited by:

    1. Fudenberg, Drew & Kamada, Yuichiro, 2018. "Rationalizable partition-confirmed equilibrium with heterogeneous beliefs," Games and Economic Behavior, Elsevier, vol. 109(C), pages 364-381.
    2. Schipper, Burkhard C., 2021. "Discovery and equilibrium in games with unawareness," Journal of Economic Theory, Elsevier, vol. 198(C).
    3. Desgranges, Gabriel & Gauthier, Stéphane, 2016. "Rationalizability and efficiency in an asymmetric Cournot oligopoly," International Journal of Industrial Organization, Elsevier, vol. 44(C), pages 163-176.
    4. Berman, Ron & Heller, Yuval, 2020. "Naive Analytics Equilibrium," MPRA Paper 103824, University Library of Munich, Germany.
    5. Yuval Heller & Eyal Winter, 2020. "Biased-Belief Equilibrium," American Economic Journal: Microeconomics, American Economic Association, vol. 12(2), pages 1-40, May.
    6. Giuseppe Attanasi & Pierpaolo Battigalli & Elena Manzoni, 2016. "Incomplete-Information Models of Guilt Aversion in the Trust Game," Management Science, INFORMS, vol. 62(3), pages 648-667, March.
    7. Annie Liang, 2019. "Games of Incomplete Information Played By Statisticians," Papers 1910.07018, arXiv.org, revised Jul 2020.
    8. Annie Liang, 2016. "Games of Incomplete Information Played by Statisticians," PIER Working Paper Archive 16-028, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania, revised 01 Jan 2016.
    9. , & ,, 2015. "Rationalizable partition-confirmed equilibrium," Theoretical Economics, Econometric Society, vol. 10(3), September.
    10. Pierpaolo Battigalli & Simone Cerreia-Vioglio & Fabio Maccheroni & Massimo Marinacci, 2015. "Self-Confirming Equilibrium and Model Uncertainty," American Economic Review, American Economic Association, vol. 105(2), pages 646-677, February.
    11. Battigalli, P. & Catonini, E. & Lanzani, G. & Marinacci, M., 2019. "Ambiguity attitudes and self-confirming equilibrium in sequential games," Games and Economic Behavior, Elsevier, vol. 115(C), pages 1-29.
    12. Jernej Copic, 2015. "Disagreement, information and welfare," 2015 Meeting Papers 1344, Society for Economic Dynamics.
    13. Dominik Grafenhofer & Wolfgang Kuhle, 2019. "Observing Actions in Bayesian Games," Papers 1904.10744, arXiv.org.
    14. Dominik Grafenhofer & Wolfgang Kuhle, 2021. "Observing Actions in Global Games," Papers 2111.10554, arXiv.org.
    15. Pierpaolo Battigalli & Simone Cerreia-Vioglio & Fabio Maccheroni & Massimo Marinacci, 2011. "Selfconfirming Equilibrium and Uncertainty," Working Papers 428, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
    16. Clark, Daniel & Fudenberg, Drew & He, Kevin, 2022. "Observability, dominance, and induction in learning models," Journal of Economic Theory, Elsevier, vol. 206(C).
    17. Giacomo Bonanno, 2021. "Rational play in games: A behavioral approach," Working Papers 344, University of California, Davis, Department of Economics.
    18. Norimasa Kobayashi & Yasuo Sasaki, 2024. "Rationalizable self-confirming equilibrium in static games with unawareness," International Journal of Game Theory, Springer;Game Theory Society, vol. 53(3), pages 765-790, September.
    19. Xiao Luo & Xuewen Qian & Yang Sun, 2021. "The algebraic geometry of perfect and sequential equilibrium: an extension," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 71(2), pages 579-601, March.

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    More about this item

    Keywords

    Rationalizability; self-confirming equilibrium; epistemic framework; robust equilibrium predictions;
    All these keywords.

    JEL classification:

    • C70 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - General
    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games

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