Bounded Reasoning and Higher-Order Uncertainty

Willemien Kets

No qt498, SocArXiv from Center for Open Science

Abstract: A standard assumption in game theory is that players have an infinite depth of reasoning: they think about what others think and about what others think that othersthink, and so on, ad infinitum. However, in practice, players may have a finite depth of reasoning. For example, a player may reason about what other players think, but not about what others think he thinks. This paper proposes a class of type spaces that generalizes the type space formalism due to Harsanyi (1967) so that it can model players with an arbitrary depth of reasoning. I show that the type space formalism does not impose any restrictions on the belief hierarchies that can be modeled, thus generalizing the classic result of Mertens and Zamir (1985). However, there is no universal type space that contains all type spaces.

Date: 2021-04-24
New Economics Papers: this item is included in nep-cwa, nep-gth and nep-mic
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Working Paper: Bounded Reasoning and Higher-Order Uncertainty (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:osf:socarx:qt498

DOI: 10.31219/osf.io/qt498

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