Characterizing the Strategic Impact of Misspecified Beliefs

Yi-Chun Chen, Alfredo Di Tillio, Eduardo Faingold, Siyang Xiong

Research output: Contribution to journalArticle (Academic Journal)peer-review

3 Citations (Scopus)
291 Downloads (Pure)

Abstract

Previous research has established that the predictions of game theory are quite sensitive to the assumptions made about the players’ beliefs. We evaluate the severity of this robustness problem by characterizing conditions on the primitives of the model—the players’ beliefs and higher-order beliefs about the payoff-relevant parameters—for the behavior of a given Harsanyi type to be approximated by the behavior of (a sequence of) perturbed types. This amounts to providing belief-based characterizations of the strategic topologies of Dekel, Fudenberg, and Morris (2006). We apply our characterizations to a variety of questions concerning robustness to perturbations of higher-order beliefs, including genericity of types that are consistent with a common prior, and we investigate the connections between our notions of robustness and the notion of common p-belief of Monderer and Samet (1989).
Original languageEnglish
Pages (from-to)1424-1471
Number of pages48
JournalReview of Economic Studies
Volume84
Issue number4
Early online date24 Dec 2016
DOIs
Publication statusPublished - 1 Oct 2017

Structured keywords

  • ECON Microeconomic Theory

Keywords

  • Games with incomplete information
  • rationalizability
  • higher-order beliefs
  • robustness

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