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Title:Quotient spaces of boundedly rational types PDF Logo
Authors:Cianciaruso, Davide
Germano, Fabrizio
Issue Date:2011
Series/Report no.:Discussion Paper, Center for Mathematical Studies in Economics and Management Science 1539
Abstract:By identifying types whose low-order beliefs - up to level li - about the state of nature coincide, we obtain quotient type spaces that are typically smaller than the original ones, preserve basic topological properties, and allow standard equilibrium analysis even under bounded reasoning. Our Bayesian Nash (li, l-i)-equilibria capture players' inability to distinguish types belonging to the same equivalence class. The case with uncertainty about the vector of levels (li, l-i) is also analyzed. Two examples illustrate the constructions.
Subjects:incomplete-information games
high-order reasoning
type space
quotient space
hierarchies of beliefs
bounded rationality
JEL:C72
D03
D83
Document Type:Working Paper
Appears in Collections:Discussion Papers, Kellogg School of Management, Northwestern University

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