On the Strategic Impact of an Event under Non-Common Priors
Journal article: This paper studies the impact of a small probability event on strategic behavior in incomplete information games with non-common priors. It is shown that the global impact of a small probability event (i.e., its propensity to affect strategic behavior at all states in the state space) has an upper bound that is an increasing function of a measure of discrepancy from the common prior assumption. In particular, its global impact can be arbitrarily large under non-common priors, but is bounded from above under common priors. These results quantify the different implications common prior and non-common prior models have on the (infinite) hierarchies of beliefs.
Author(s)
Oyama Daisuke, Olivier Tercieux
Journal
- Games and Economic Behavior
Date of publication
- 2012
Keywords JEL
Keywords
- Common prior assumption
- Higher order belief
- Rationalizability
- Contagion
- Belief potential
Pages
- 321-331
URL of the HAL notice
Version
- 1
Volume
- 74