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Payoff Information and Self-Confirming Equilibrium

Author

Listed:
  • Eddie Dekel
  • Drew Fudenberg
  • David K. Levine

Abstract

In a self-confirming equilibrium, each player correctly forecasts the actions that opponents will take along the equilibrium path, but may be mistaken about the way that opponents would respond to deviations. This models a steady state of a learning process in which players observe actions played by their opponents, rather than a complete specification of their strategies. Consequently, players need not receive evidence that their forecasts of off-path play are incorrect. In practice, players understand that opponents are rational and have some information about their opponents payoffs. This paper develops a refinement of self-confirming equilibrium that incorporates the effects of such information. We show that this concept is robust. We also discuss its relationship to other concepts. In particular, we show that it is closely connected to assuming almost common certainty of payoffs in an epistemic model with independent beliefs.
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Suggested Citation

  • Eddie Dekel & Drew Fudenberg & David K. Levine, 1996. "Payoff Information and Self-Confirming Equilibrium," Harvard Institute of Economic Research Working Papers 1774, Harvard - Institute of Economic Research.
    • Handle: RePEc:fth:harver:1774
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    References listed on IDEAS

    as
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    JEL classification:

    • C7 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory

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