Abstract
How can we know in advance whether simplifying assumptions about beliefs will make a difference in the conclusions of game-theoretic models? We define critical types to be types whose rationalizable correspondence is sensitive to assumptions about arbitrarily high-order beliefs. We show that a type is critical if and only if it exhibits common belief in some non-trivial event. We use this characterization to show that all types in commonly used type spaces are critical. On the other hand, we show that regular types (types that are not critical) are generic, although perhaps inconvenient to use in applications.
Original language | English (US) |
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Pages (from-to) | 907-937 |
Number of pages | 31 |
Journal | Review of Economic Studies |
Volume | 78 |
Issue number | 3 |
DOIs | |
State | Published - Jul 1 2011 |
Funding
Acknowledgment. Both authors acknowledge National Science Foundation grant #0958856. We thank Yi-Chun Chen for outstanding research assistance. We are grateful to the editor, Andrea Prat, and three anonymous referees for detailed comments. We also thank Muhamet Yildiz for suggestions that helped improve the exposition. We take all the blame.
Keywords
- Higher-order beliefs
- Robustness
ASJC Scopus subject areas
- Economics and Econometrics