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The Cutting Power of Preparation

By O.R.C. Tercieux and M. Voorneveld


In a strategic game, a curb set [Basu and Weibull, Econ.Letters 36 (1991) 141-146] is a product set of pure strategies containing all best responses to every possible belief restricted to this set.Prep sets [Voorneveld, Games Econ. Behav. 48 (2004) 403-414] relax this condition by only requiring the presence of at least one best response to such a belief.The purpose of this paper is to provide sufficient conditions under which minimal prep sets give sharp predictions.These conditions are satisfied in many economically relevant classes of games, including supermodular games, potential games, and congestion games with player-specific payoffs.In these classes, minimal curb sets generically have a large cutting power as well, although it is shown that there are relevant subclasses of coordination games and congestion games where minimal curb sets have no cutting power at all and simply consist of the entire strategy space.

Publisher: Microeconomics
Year: 2005
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