How to Make Sense of the Common Prior Assumption Under Incomplete Information

Posted: 5 Oct 1999

See all articles by Giacomo Bonanno

Giacomo Bonanno

University of California, Davis - Department of Economics

Klaus Nehring

University of California, Davis - Department of Economics

Abstract

Recent contributions have questioned the meaningfulness of the Common Prior Assumption (CPA) in situations of incomplete information. We characterize the CPA in terms of the primitives (individuals' belief hierarchies) without reference to an ex ante stage. The key is to rule out "agreeing to disagree" about any aspect of beliefs. Our results also yield a generalization of single-person Bayesian updating to situations without perfect recall. The entire analysis is carried out locally at the "true state", using beliefs only, rather than beliefs-plus-knowledge. We discuss the role of truth assumptions on beliefs for a satisfactory notion of the CPA, and point out an important conceptual discontinuity between the case of two and many individuals.

JEL Classification: C70

Suggested Citation

Bonanno, Giacomo F. and Nehring, Klaus, How to Make Sense of the Common Prior Assumption Under Incomplete Information. International Journal of Game Theory, Vol. 28, Iss. 3, August 1999. Available at SSRN: https://ssrn.com/abstract=176572

Giacomo F. Bonanno (Contact Author)

University of California, Davis - Department of Economics ( email )

One Shields Drive
Davis, CA 95616-8578
United States
916-752-1574 (Phone)
916-752-9382 (Fax)

Klaus Nehring

University of California, Davis - Department of Economics ( email )

One Shields Drive
Davis, CA 95616-8578
United States
916-752-3379 (Phone)
916-752-9382 (Fax)

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