Games of Incomplete Information Played by Statisticians

55 Pages Posted: 13 Mar 2017  

Annie Liang

Microsoft Research

Date Written: August 10, 2016

Abstract

The common prior assumption is a convenient restriction on beliefs in games of incomplete information, but conflicts with evidence that players publicly disagree in many economic environments. This paper proposes a foundation for heterogeneous beliefs in games, in which disagreement arises not from different information, but from different interpretations of common information. A key assumption imposes that while players may interpret data in different ways, they have common certainty in the predictions induced by a class of interpretations. The main results characterize which rationalizable actions and Nash equilibria can be predicted when agents observe a finite quantity of data, and how much data is needed to predict different solutions. This quantity, which I refer to as the robustness of the solution, is shown to depend crucially on the degree of strictness of the solution and the "complexity" of inference from data.

Suggested Citation

Liang, Annie, Games of Incomplete Information Played by Statisticians (August 10, 2016). Available at SSRN: https://ssrn.com/abstract=2931873 or http://dx.doi.org/10.2139/ssrn.2931873

Annie Liang (Contact Author)

Microsoft Research ( email )

One Memorial Drive, 14th Floor
Cambridge, MA 02142
United States

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