Common Knowledge and Backward Induction: A Solution to the Paradox
نویسنده
چکیده
There are games which have a solution only if some of the assumptions of the theory of the game are not common knowledge among the players. In particular, assuming that players' rationality is common knowledge among them makes the theory inconsistent at some information set, and therefore the players become unable to use it to predict each other's strategy choices. In this paper I show that (a) common knowledge of rationality need not be assumed for a solution to obtain, and (b) that a r icher theory of the game can accomodate common knowledge of rationality, If a theory of the game is modified so as to include a theory of belief revision, it can be shown that inconsistencies do not arise.
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