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31.10. Micro Theory Seminar: Antonio Penta

Micro Theory Seminar with Antonio Penta (University of Barcelona) ICREA-Research Professor, UPF and Barcelona

Event details
What
  • Micro Theory Seminar
When Oct 31, 2018
from 16:30 to 17:45
Where faculty room
Contact Name Stephan Lauermann
Contact Email
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Topic

 Rationalizability and Observability

Abstract

 We study the strategic impact of players' higher order uncertainty over whether their
actions are observable to their opponents. We characterize the predictions of Rationality and Common Belief in Rationality (RCBR) which are `robust' in the sense that they do not depend on the restrictions on players' in nite order beliefs over the extensive form (that is, the observability of actions). We show that RCBR is generically unique, and that its robust predictions often support a robust re nement of rationalizability. For instance, in unanimity games, the robust predictions of RCBR rule out any ineffcient equilibrium action; in zero-sum games, they support the maxmin solution, resolving a classical tension between RCBR and the maxmin logic; in common interest games, RCBR generically ensures efficient coordination of behavior, thereby showing that higher order uncertainty over the extensive form serves as a mechanism for equilibrium coordination on purely eductive grounds.
We also characterize the robust predictions in settings with asynchronous moves, but in which the second mover does not necessarily observe the fi rst mover's action. In these settings, higher order uncertainty over the observability of the earlier choice yields particularly sharp results: in `Nash-commitment games', for instance, RCBR generically selects the equilibrium of the static game which is most favorable to the earlier mover. This means that a fi rst-mover advantage arises whenever higher-order beliefs do not rule out that it might exist, even if the earlier mover's action is not observable. Hence, in the presence of extensive form uncertainty, timing alone may detemine the attribution of the strategic advantage, independent of the actual observability of choices.
 

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