Rational behavior with payoff uncertainty

Eddie Dekel*, Drew Fudenberg

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

91 Scopus citations

Abstract

The iterated deletion of weakly dominated strategies has been advanced as a necessary requirement for "rational" play. However, this requirement relies on the assumption that the players have no doubts about their opponents' payoffs. We show that once such doubts are introduced, all that can be justified by an appeal to rationality is one round of deletion of weakly dominated strategies, followed by iterated deletion of strategies that are strongly dominated. This extends the Fudenberg, Kreps, and Levine (J. Econ. Theory 12 (1988), 354-380) study of the robustness of Nash equilibrium refinements to the robustness of solution concepts based only on rationality. Our results also clarify the relationship between various notions of what it means for payoff uncertainty to be "small.".

Original languageEnglish (US)
Pages (from-to)243-267
Number of pages25
JournalJournal of Economic Theory
Volume52
Issue number2
DOIs
StatePublished - Dec 1990

ASJC Scopus subject areas

  • Economics and Econometrics

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