Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/92786
Authors: 
Takamiya, Koji
Tanaka, Akira
Year of Publication: 
2006
Series/Report no.: 
ISER Discussion Paper, Institute of Social and Economic Research, Osaka University 650
Abstract: 
This paper reexamines the paradoxical aspect of the electronic mail game (Rubinstein, 1989). The electronic mail game is a coordination game with payoff uncertainty. At a Bayesian Nash equilibrium of the game, players cannot achieve the desired coordination of actions even when a high order of mutual knowledge of payoff functions obtains. We want to make explicit the role of knowledge about rationality of players, not only that of payoff functions. For this purpose, we use an extended version of the belief system model developed by Aumann and Brandenburger (1995). We propose a certain way of embedding the electronic mail game in an belief system. And we show that for rational players to coordinate their actions, for any embedding belief systems, it is necessary that the upper bound order of mutual knowledge of payoff functions exceeds the upper bound order of mutual knowledge of rationality. This result implies that under common knowledge of rationality, the coordination never occurs, which is similar to Rubinstein's result. We point out, however, that there exists a class embedding belief systems for which the above condition is also sufficient for the desired coordination.
Subjects: 
electronic mail game
mutual knowledge
common knowledge
rationality
interactive belief system
JEL: 
C72
D81
D82
Document Type: 
Working Paper

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