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Quotient Spaces of Boundedly Rational Types

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  • Davide Cianciaruso
  • Fabrizio Germano

Abstract

By identifying types whose low-order beliefs, up to level l(sub i), about the state of nature coincide, we obtain quotient type spaces that are typically smaller than the original ones, preserve basic topological properties, and allow standard equilibrium analysis even under bounded reasoning. Our Bayesian Nash (l(sub i, l sub _i)-equilibria capture players’ inability to distinguish types belonging to the same equivalence class. The case with uncertainty about the vector of levels (l(sub i, l sub _i) is also analyzed. Two examples illustrate the constructions. JEL Classification Numbers: C72, D03, D83

Suggested Citation

  • Davide Cianciaruso & Fabrizio Germano, 2011. "Quotient Spaces of Boundedly Rational Types," Discussion Papers 1539, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
    • Handle: RePEc:nwu:cmsems:1539
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    Cited by:

    1. Yildiz, Muhamet, 2015. "Invariance to representation of information," Games and Economic Behavior, Elsevier, vol. 94(C), pages 142-156.

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    More about this item

    Keywords

    Incomplete-information games; high-order reasoning; type space; quotient space; hierarchies of beliefs; bounded rationality Principle; menus; signals; direct revelation mechanisms.;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness

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