Belief in the opponentsʼ future rationality

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Abstract

For dynamic games we consider the idea that a player, at every stage of the game, will always believe that his opponents will choose rationally in the future. This is the basis for the concept of common belief in future rationality, which we formalize within an epistemic model. We present an iterative procedure, backward dominance, that proceeds by eliminating strategies from the game, based on strict dominance arguments. We show that the backward dominance procedure selects precisely those strategies that can rationally be chosen under common belief in future rationality if we would not impose (common belief in) Bayesian updating.
Original languageEnglish
Pages (from-to)231-254
JournalGames and Economic Behavior
Volume83
DOIs
Publication statusPublished - 1 Jan 2014

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