Discovery and Equilibrium in Games with Unawareness

Schipper, Burkhard C (2018): Discovery and Equilibrium in Games with Unawareness.

Abstract

Equilibrium notions for games with unawareness in the literature cannot be interpreted as steady-states of a learning process because players may discover novel actions during play. In this sense, many games with unawareness are ``self-destroying'' as a player's representation of the game may change after playing it once. We define discovery processes where at each state there is an extensive-form game with unawareness that together with the players' play determines the transition to possibly another extensive-form game with unawareness in which players are now aware of actions that they have discovered. A discovery process is rationalizable if players play extensive-form rationalizable strategies in each game with unawareness. We show that for any game with unawareness there is a rationalizable discovery process that leads to a self-confirming game that possesses a self-confirming equilibrium in extensive-form rationalizable strategies. This notion of equilibrium can be interpreted as steady-state of both a discovery and learning process.

• Item Type: MPRA Paper
• Language: English
• Keywords: Self-confirming equilibrium, conjectural equilibrium, extensive-form rationalizability, unawareness, extensive-form games, equilibrium, learning, discovery
• Subjects: C - Mathematical and Quantitative Methods > C7 - Game Theory and Bargaining Theory > C72 - Noncooperative Games; D - Microeconomics > D8 - Information, Knowledge, and Uncertainty > D83 - Search ; Learning ; Information and Knowledge ; Communication ; Belief ; Unawareness

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