Strategic Independence and Perfect Bayesian Equilibria

Author: Battigalli P.  

Publisher: Academic Press

ISSN: 0022-0531

Source: Journal of Economic Theory, Vol.70, Iss.1, 1996-07, pp. : 201-234

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Abstract

This paper evaluates different refinements of subgame perfection, which rely on different restrictions on players' assessments, using a simple and intuitive independence property for conditional probability systems on the space of strategy profiles. This independence property is necessary for full consistency of assessments, and it is equivalent to full consistency in games with observable deviators. Furthermore, while every conditional system on the strategies satisfying the independence property corresponds to a generally reasonable extended assessment as defined by Fudenberg and Tirole [ J. Econ. Theory 53 (1991), 236-260], such extended assessments may violate independence, full consistency, and invariance with respect to interchanging of essentially simultaneous moves. Journal of Economic Literature Classification Number: C72.