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Dynamic Unawareness and Rationalizable Behavior

Heifetz, Aviad and Meier, Martin and Schipper, Burkhard C. (2009): Dynamic Unawareness and Rationalizable Behavior.

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Abstract

We define generalized extensive-form games which allow for mutual unawareness of actions. We extend Pearce's (1984) notion of extensive-form (correlated) rationalizability to this setting, explore its properties and prove existence. We define also a new variant of this solution concept, prudent rationalizability, which refines the set of outcomes induced by extensive-form rationalizable strategies. We apply prudent rationalizability to the analysis of verifiable communication with unawareness. Finally, we define the normal form of a generalized extensive-form game, and characterize in it extensive-form rationalizability by iterative conditional dominance.

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