I thank Pierpaolo Battigalli, Adam Brandenburger, Amanda Friedenberg, Bart Lipman, and two anonymous referees for detailed feedback, and Susan Athey, Heski Bar-Isaac, Liran Einav, Yossi Feinberg, Drew Fudenberg, Jon Levin, Stephen Morris, Ilya Segal, Andy Skrzypacz, Federico Weinschelbaum, and Muhamet Yildiz for helpful comments. This paper is a revised version of a chapter of my Stanford Ph.D. dissertation; I thank SIEPR for financial support through the Bradley Graduate and Post-Graduate Fellowship Program.
Rationalizable conjectural equilibrium: A framework for robust predictions
Version of Record online: 16 MAY 2013
Copyright © 2013 Ignacio Esponda
Volume 8, Issue 2, pages 467–501, May 2013
How to Cite
Esponda, I. (2013), Rationalizable conjectural equilibrium: A framework for robust predictions. Theoretical Economics, 8: 467–501. doi: 10.3982/TE928
- Issue online: 16 MAY 2013
- Version of Record online: 16 MAY 2013
- Submitted 2011-1-20. Final version accepted 2012-7-2. Available online 2012-7-2.
- self-confirming equilibrium;
- epistemic framework;
- robust equilibrium predictions
I introduce a new framework to study environments with both structural and strategic uncertainty, different from Harsanyi's (1967–1968) “Bayesian games”, that allows a researcher to test the robustness of Nash predictions while maintaining certain desirable restrictions on players' beliefs. The solution concept applied to this environment is rationalizable conjectural equilibrium (RCE), which integrates both learning from feedback (in the spirit of self-confirming equilibrium) and from introspection (in the spirit of rationalizability). I provide an epistemic definition of RCE and obtain a characterization in terms of a procedure that generalizes iterated deletion of strategies that are not a best response.