The e-mail game revisited - Modeling rough inductive reasoning

Abstract

I study the robustness of Rubinstein´s (1989) E-Mail Game results towards rough inductive reasoning. Rough induction is a form of boundedly rational reasoning where a player does not carry out every inductive step. The information structure in the E-Mail game is generalized and the conditions are characterized under which Rubinstein´s results hold. Rough induction generates a payoff dominant equilibrium where the expected payoffs change continously in the probability of "faulty" communication. The article follows one of Morris´(2001a) reactions to the E-Mail game "that one should try to come up with a model of boundedly rational behavior that delivers predictions that are insensitive to whether there is common knowledge or a large number of levels of knowledge".