80,567 research outputs found
Correlated Equilibrium via Hierarchies of Beliefs
We study a model of correlated equilibrium where every player takes actions based on his hierarchies of beliefs (belief on what other players will do, on what other players believe about others will do, etc.) intrinsic to the game. Our model does away with messages from outside mediator that are usually assumed in the interpretation of correlated equilibrium. We characterize in every finite, complete information game the exact sets of correlated equilibria (both subjective and objective) that can be obtained conditioning on hierarchies of beliefs; the characterizations rely on a novel iterated deletion procedure. If the procedure ends after k rounds of deletion for a correlated equilibrium obtained from hierarchies of beliefs, then players in the equilibrium need to reason to at most k-th order beliefs. Further conceptual and geometric properties of the characterizations are studied.game theory; correlated equilibrium; higher order beliefs; purification; intrinsic correlation
EPISTEMIC FOUNDATIONS OF SOLUTION CONCEPTS IN GAME THEORY: AN INTRODUCTION
We give an introduction to the literature on the epistemic foundations of solution concepts in game theory. Only normal-form games are considered. The solution concepts analyzed are rationalizability, strong rationalizability, correlated equilibrium and Nash equilibrium. The analysis is carried out locally in terms of properties of the belief hierarchies. Several examples are used throughout to illustrate definitions and concepts.
Games of incomplete information without common knowledge priors
We relax the assumption that priors are common knowledge, in the standard model of games of incomplete information. We make the realistic assumption that the players are boundedly rational: they base their actions on finite-order belief hierarchies. When the different layers of beliefs are independent of each other, we can retain Harsányi’s type-space, and we can define straightforward generalizations of Bayesian Nash Equilibrium (BNE) and Rationalizability in our context. Since neither of these concepts is quite satisfactory, we propose a hybrid concept, Mirage Equilibrium, providing us with a practical tool to work with inconsistent belief hierarchies. When the different layers of beliefs are correlated, we must enlarge the type-space to include the parametric beliefs. This presents us with the difficulty of the inherent openness of finite belief subspaces. Appealing to bounded rationality once more, we posit that the players believe that their opponent holds a belief hierarchy one layer shorter than they do and we provide alternative generalizations of BNE and Rationalizability. Finally, we show that, when beliefs are degenerate point beliefs, the definition of Mirage Equilibrium coincides with that of the generalized BNE.inconsistent beliefs, games of incomplete information, finite belief hierarchy
Belief-Invariant and Quantum Equilibria in Games of Incomplete Information
Drawing on ideas from game theory and quantum physics, we investigate
nonlocal correlations from the point of view of equilibria in games of
incomplete information. These equilibria can be classified in decreasing power
as general communication equilibria, belief-invariant equilibria and correlated
equilibria, all of which contain the familiar Nash equilibria. The notion of
belief-invariant equilibrium has appeared in game theory before, in the 1990s.
However, the class of non-signalling correlations associated to
belief-invariance arose naturally already in the 1980s in the foundations of
quantum mechanics.
Here, we explain and unify these two origins of the idea and study the above
classes of equilibria, and furthermore quantum correlated equilibria, using
tools from quantum information but the language of game theory. We present a
general framework of belief-invariant communication equilibria, which contains
(quantum) correlated equilibria as special cases. It also contains the theory
of Bell inequalities, a question of intense interest in quantum mechanics, and
quantum games where players have conflicting interests, a recent topic in
physics.
We then use our framework to show new results related to social welfare.
Namely, we exhibit a game where belief-invariance is socially better than
correlated equilibria, and one where all non-belief-invariant equilibria are
socially suboptimal. Then, we show that in some cases optimal social welfare is
achieved by quantum correlations, which do not need an informed mediator to be
implemented. Furthermore, we illustrate potential practical applications: for
instance, situations where competing companies can correlate without exposing
their trade secrets, or where privacy-preserving advice reduces congestion in a
network. Along the way, we highlight open questions on the interplay between
quantum information, cryptography, and game theory
Self-referential thinking and equilibrium as states of mind in games: fMRI evidence
Sixteen subjects' brain activity were scanned using previous termfMRInext term as they made choices, expressed beliefs, and expressed iterated 2nd-order beliefs (what they think others believe they will do) in eight games. Cingulate cortex and prefrontal areas (active in “theory of mind” and social reasoning) are differentially activated in making choices versus expressing beliefs. Forming self-referential 2nd-order beliefs about what others think you will do seems to be a mixture of processes used to make choices and form beliefs. In equilibrium, there is little difference in neural activity across choice and belief tasks; there is a purely neural definition of equilibrium as a “state of mind.” “Strategic IQ,” actual earnings from choices and accurate beliefs, is negatively correlated with activity in the insula, suggesting poor strategic thinkers are too self-focused, and is positively correlated with ventral striatal activity (suggesting that high IQ subjects are spending more mental energy predicting rewards)
Supersonic quantum communication
When locally exciting a quantum lattice model, the excitation will propagate
through the lattice. The effect is responsible for a wealth of non-equilibrium
phenomena, and has been exploited to transmit quantum information through spin
chains. It is a commonly expressed belief that for local Hamiltonians, any such
propagation happens at a finite "speed of sound". Indeed, the Lieb-Robinson
theorem states that in spin models, all effects caused by a perturbation are
limited to a causal cone defined by a constant speed, up to exponentially small
corrections. In this work we show that for translationally invariant bosonic
models with nearest-neighbor interactions, this belief is incorrect: We prove
that one can encounter excitations which accelerate under the natural dynamics
of the lattice and allow for reliable transmission of information faster than
any finite speed of sound. The effect is only limited by the model's range of
validity (eventually by relativity). It also implies that in non-equilibrium
dynamics of strongly correlated bosonic models far-away regions may become
quickly entangled, suggesting that their simulation may be much harder than
that of spin chains even in the low energy sector.Comment: 4+3 pages, 1 figure, some material added, typographic error fixe
Market Experimentation in a Dynamic Differentiated-Goods Duopoly
We study the evolution of prices in a symmetric duopoly where firms are uncertain about the degree of product differentiation. Customers sometimes perceive the products as close substitutes, sometimes as highly differentiated. Firms learn about their competitive environment from the quantities sold and a background signal. As the information of the market outcomes increases with the price differential, there is scope for active learning. In a setting with linear demand curves, we derive firms' pricing strategies as payoff-symmetric mixed or correlated Markov perfect equilibria of a stochastic differential game where the common posterior belief is the natural state variable. When information has low value, firms charge the same price as would be set by myopic players, and there is no price dispersion. When firms value information more highly, on the other hand, they actively learn by creating price dispersion. This market experimentation is transient, and most likely to be observed when the firms' environment changes sufficiently often, but not too frequently.Duopoly experimentation, Bayesian learning, stochastic differential game, Markov-perfect equilibrium, mixed strategies, correlated equilibrium.
Approximate knowledge of rationality and correlated equilibria
We extend Aumann's [3] theorem deriving correlated equilibria as a consequence of common priors and common knowledge of rationality by explicitly allowing for non-rational behavior. We replace the
assumption of common knowledge of rationality with a substantially weaker notion, joint p-belief of rationality, where agents believe the other agents are rational with probabilities p = (pi)i2I or more.
We show that behavior in this case constitutes a constrained correlated equilibrium of a doubled game
satisfying certain p-belief constraints and characterize the topological structure of the resulting set of p-rational outcomes. We establish continuity in the parameters p and show that, for p su ciently close to
one, the p-rational outcomes are close to the correlated equilibria and, with high probability, supported on strategies that survive the iterated elimination of strictly dominated strategies. Finally, we extend
Aumann and Dreze's [4] theorem on rational expectations of interim types to the broader p-rational belief systems, and also discuss the case of non-common priors.Spanish Ministry of Science and Technology (Grants SEJ2007-64340 and ECO2011-28965) Spanish Ministry of Science and Technology (Grant ECO2009-11213
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