Common Certainty of Rationality Revisited

23 Pages Posted: 20 Mar 2011

See all articles by Stephen Morris

Stephen Morris

Princeton University - Department of Economics

Satoru Takahashi

National University of Singapore (NUS) - Department of Economics

Date Written: February 18, 2011

Abstract

In conventional epistemic analysis of solution concepts in complete information games, complete information is implicitly interpreted to mean common certainty of (i) a mapping from action profiles to outcomes; (ii) players’ (unconditional) preferences over outcomes; and (iii) players’ preferences over outcomes conditional on others’ actions. We characterize a new solution concept - preference-correlated rationalizability - that captures common certainty of (i) and (ii) but not (iii). We show that it is badly behaved, with failures of upper hemicontinuity giving rise to counter-intuitive results. We discuss restrictions that restore well-behaved results.

Suggested Citation

Morris, Stephen Edward and Takahashi, Satoru, Common Certainty of Rationality Revisited (February 18, 2011). Economic Theory Center Working Paper No. 010-2011. Available at SSRN: https://ssrn.com/abstract=1789773 or http://dx.doi.org/10.2139/ssrn.1789773

Stephen Edward Morris (Contact Author)

Princeton University - Department of Economics ( email )

Princeton, NJ 08544-1021
United States

Satoru Takahashi

National University of Singapore (NUS) - Department of Economics ( email )

1 Arts Link, AS2 #06-02
Singapore 117570, Singapore 119077
Singapore

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