Dynamic Unawareness and Rationalizable Behavior

Abstract:     
We define generalized extensive-form games which allow for mutual unawareness of actions. We extend Pearce's (1984) notion of extensive-form (correlated) rationalizability to this setting, explore its properties and prove existence. We define also a new variant of this solution concept, prudent rationalizability, which refines the set of outcomes induced by extensive-form rationalizable strategies. We apply prudent rationalizability to the analysis of verifiable communication with unawareness. Finally, we define the normal form of a generalized extensive-form game, and characterize in it extensive-form rationalizability by iterative conditional dominance.

Number of Pages in PDF File: 57

Keywords: Unawareness, extensive-form games, extensive-form rationalizability, prudent rationalizability, iterative conditional dominance

JEL Classification: C70, C72, D80, D82

working papers series