Stability in large Bayesian games with heterogeneous players

Bayesian Nash equilibria that fail to be hindsight (or alternatively ex-post) stable do not provide reliable predictions of outcomes of games in many applications. We characterize a family of Bayesian games in which all equilibria are asymptotically hindsight-stable, and discuss the consequences of this robustness property. In contrast to earlier literature, we establish hindsight stability in a class of games in which players are not anonymous and where type spaces and action spaces can be infinite. Acknowledgements. The authors would like to thank Michael Kearns, Colin McDiarmid and Eran Shmaya for useful comments and suggestions. We also thank seminar participants at GAMES 2008, Northwestern University and SAET meetings in Singapore for helpful comments. This is a substantially revised version of Chapter 3 of the first author’s Ph.D. dissertation submitted to Northwestern University in June 2008. New York University, Stern School of Business, Department of Economics; [email protected] Northwestern University, Kellogg School of Management, Managerial Economics and Decision Sciences Department; [email protected]