On the Strategic Impact of an Event under Non-Common Priors

Abstract : 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.
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Submitted on : Tuesday, November 20, 2012 - 9:57:34 AM
Last modification on : Tuesday, April 24, 2018 - 5:20:14 PM

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Oyama  Daisuke, Olivier Tercieux. On the Strategic Impact of an Event under Non-Common Priors. Games and Economic Behavior, Elsevier, 2012, 74 (1), pp.321-331. ⟨10.1016/j.geb.2011.06.003⟩. ⟨halshs-00754605⟩

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