ICEF Research Seminar by Peio Zuazo-Garin (University of the Basque Country)
Speaker: Peio Zuazo-Garin (University of the Basque Country)
Theme: "Rationalizability and Observability" joint with Antonio Penta
Abstract: We study the strategic impact of players' higher order uncertainty over whether their actions are observable to their opponent. We characterize the "robust predictions" of Rationality and Common Belief in Rationality (RCBR), i.e. those which do not depend on the restrictions on players' infinite order beliefs over the extensive form. We show that RCBR is generically unique, and that the robust predictions often support a robust refinement of rationalizability. For instance, in unanimity games, the robust predictions of RCBR rule out any inefficient equilibrium action; in zero-sum games, they support the maxmin solution, solving a classical tension between RCBR and the maxmin logic; in common interest games, RCBR generically ensures efficient coordination of behavior, thereby showing that higher order uncertainty over the extensive form serves as a mechanism for equilibrium coordination on purely eductive grounds.