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Interim Partially Correlated Rationalizability

Tang, Qianfeng (2010): Interim Partially Correlated Rationalizability.

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Abstract

In game theory, there is a basic methodological dichotomy between Harsanyi's "game-theoretic" view and Aumann's "Bayesian decision-theoretic" view of the world. We follow the game-theoretic view, propose and study interim partially correlated rationalizability for games with incomplete information. We argue that the distinction between this solution concept and the interim correlated rationalizability studied by Dekel, Fudenberg and Morris (2007) is fundamental, in that the latter implicitly follows Aumann's Bayesian view.

Our main result shows that two types provide the same prediction in interim partially correlated rationalizability if and only if they have the same infinite hierarchy of beliefs over conditional beliefs. We also establish an equivalence result between this solution concept and the Bayesian solution--a notion of correlated equilibrium proposed by Forges (1993).

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