Abstract

In this paper we introduce a novel framework that allows us to model games with players who reason about the opponents’ rationality only in some part of the game tree. We refer to this type of bounded rationality as limited focus. In particular, players try to rationalize their opponents’ moves only at the histories they focus on, i.e., formally, they strongly believe in their opponents’ rationality in these particular histories only. Our main result characterizes the strategy profiles that can be played under rationality and common strong belief in rationality by means of a simple elimination procedure, for every specification of the players’ focus. Finally, we present several special cases and applications of our framework, and we discuss how it differs from other forms of bounded perception such as unawareness.
Original languageEnglish
Pages (from-to)571-607
Number of pages37
JournalInternational Journal of Game Theory
Volume48
Issue number2
DOIs
Publication statusPublished - Jun 2019

JEL classifications

  • c72 - Noncooperative Games

Keywords

  • limited focus
  • backward induction
  • forward induction
  • bounded rationality
  • epistemic game theory
  • Backward induction
  • RATIONALIZABILITY
  • Limited focus
  • Epistemic game theory
  • SEARCH
  • RECALL
  • Bounded rationality
  • Forward induction
  • BACKWARD INDUCTION
  • MEMORY
  • EQUILIBRIA
  • BELIEFS
  • HIERARCHIES

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