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Strategic Behavior and Counterfactuals

Cristina Bicchieri
Synthese
Vol. 76, No. 1 (Jul., 1988), pp. 135-169
Published by: Springer
Stable URL: http://www.jstor.org/stable/20116549
Page Count: 35
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Strategic Behavior and Counterfactuals
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Abstract

The difficulty of defining rational behavior in game situations is that the player's strategies will depend on their expectations about other players' strategies. These expectations are beliefs the players come to the game with. Game theorists assume these beliefs to be rational in the very special sense of being "objectively correct" but no explanation is offered of the mechanism generating this property of the belief system. In many interesting cases, however, such a rationality requirement is not enough to guarantee that an equilibrium will be attained. In particular, I analyze the case of multiple equilibria, since in this case there exists a whole set of rational beliefs, so that no player can ever be certain that the others believe he has certain beliefs. In this case it becomes necessary to explicitly model the process of belief formation. This model attributes to the players a theory of counterfactuals which they use in restricting the set of possible equilibria. If it were possible to attribute to the players the same theory of counterfactuals, then the players' beliefs would eventually converge.

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