Scandinavian Working Papers in Economics

Memorandum,
Oslo University, Department of Economics

No 10/2017: Algorithms for cautious reasoning in games*

Geir B. Asheim () and Andrés Perea ()
Additional contact information
Geir B. Asheim: Dept. of Economics, University of Oslo, Postal: Department of Economics, University of Oslo, P.O Box 1095 Blindern, N-0317 Oslo, Norway
Andrés Perea: Maastricht University, Postal: EpiCenter and Department of Quantitative Economics, Maastricht University, P.O. Box 616, 6200 MD Maastricht, The Netherlands

Abstract: We provide comparable algorithms for the Dekel-Fudenberg procedure, iterated admissibility, proper rationalizability and full permissibility by means of the concepts of preference restrictions and likelihood orderings. We apply the algorithms for comparing iterated admissibility, proper rationalizability and full permissibility, and provide a sufficient condition under which iterated admissibility does not rule out properly rationalizable strategies. Finally, we use the algorithms to examine an economically relevant strategic situation, namely a bilateral commitment bargaining game.

Keywords: Non-cooperative games; proper rationalizability; iterated admissibility; bargaining

JEL-codes: C72; C78

34 pages, October 1, 2017

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