Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/58355
Authors: 
Heifetz, Aviad
Meier, Martin
Schipper, Burkhard
Year of Publication: 
2011
Series/Report no.: 
Working Papers, University of California, Department of Economics 11,4
Abstract: 
We define an extensive-form analogue of iterated admissibility, called Prudent Rationalizability (PR). In each round of the procedure, for each information set of a player a surviving strategy of hers is required to be rational vis-a-vis a belief system with a full-support belief on the opponents' previously surviving strategies that reach that information set. Somewhat surprisingly, prudent rationalizable strategies may not refine the set of Extensive-Form Rationalizable (EFR) strategies (Pearce 1984). However, we prove that the paths induced by PR strategy-profiles (weakly) refine the set of paths induced by EFR strategies. PR applies also to generalized extensive-form games which model mutual unawareness of actions (Heifetz, Meier and Schipper, 2011a). We demonstrate the applicability of PR in the analysis of verifiable communication, and show that it yields the same, full information unraveling prediction as does the unique sequential equilibrium singled out by Milgrom and Roberts (1986); yet, we also show that under unawareness full unraveling might fail.
Subjects: 
prudent rationalizability
caution
extensive-form rationalizability
extensive-form games
unawareness, verifiable communication
JEL: 
C70
C72
D80
D82
Document Type: 
Working Paper

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