This paper presents a formal characterization of a two stage decision rule. This characterization involves three conditions which, together, are satisfied by any choice function that can be represented as a two-tier choice function. And any choice function satisfying these three conditions can be represented as a two-tier choice function. The first condition identifies particular features of two-tier choice functions when they violate Property α. The other two conditions are essentially existence claims, required to ensure that the two tiers of (...) a choice function can be represented as (pseudo-) rationalizable choice functions. My aim is to offer a formal result that provides insight into the nature of two-tier decisions. The more we understand how a particular decision procedure operates, the more we should expect to predict its results accurately, and the more we should be able to understand the circumstances under which its use is (and is not) appropriate. (shrink)

An important finding of the game theoretic research on signaling games is the insight that under many circumstances, a signal obtains credibility by incurring costs to the sender. Therefore it seems questionable whether or not cheap talk—signals that are not payoff relevant—can serve to transmit information among rational agents. This issue is non-trivial in strategic interactions where the preferences of the players are not aligned. Researchers like Crawford & Sobel, Rabin, and Farrell demonstrated, however, that even in the case of (...) partially divergent interests, cheap talk may be informative. They assume that signals have an exogenously given meaning that is common knowledge between the players, and they explore the conditions under which such a signal is credible. This discussion has obvious relevance to the program of Gricean pragmatics in linguistics. According to Grice’s "Cooperative Principle”, this research tradition only considers scenarios where the interests of the players are aligned. Nevertheless, the assumption of differential signaling costs introduces an element of non-aligned interests. The present paper proposes a framework that combines these two research strands. Using an inference protocol of iterated best response, it gives a recipe for how the interlocutors derive rationalizable strategies from exogeneously given "literal” meanings of signals. No special assumptions about the alignment of interests or signaling costs are made. After introducing the formal model, the paper sketches several applications of this model to problems in linguistic pragmatics, like scalar implicatures, the division of pragmatic labor, and the interpretation of measure terms. (shrink)

This paper generalizes rationalizability of a choice function by a single acyclic binary relation to rationalizability by a set of such relations. Rather than selecting those options in a menu that are maximal with respect to a single binary relation, a weakly pseudo-rationalizable choice function selects those options that are maximal with respect to at least one binary relation in a given set. I characterize the class of weakly pseudo-rationalizable choice functions in terms of simple functional properties. This (...) result also generalizes Aizerman and Malishevski's characterization of pseudo-rationalizable choice functions, that is, choice functions rationalizable by a set of total orders. (shrink)

This paper introduces a new solution concept for games with incomplete preferences. The concept is based on rationalizability and it is more general than the existing ones based on Nash equilibrium. In rationalizable strategies, we assume that the players choose nondominated strategies given their beliefs of what strategies the other players may choose. Our solution concept can also be used, e.g., in ordinal games where the standard notion of rationalizability cannot be applied. We show that the sets of (...) rationalizable strategies are the maximal mutually nondominated sets. We also show that no new rationalizable strategies appear when the preferences are refined, i.e., when the information gets more precise. Moreover, noncooperative multicriteria games are suitable applications of incomplete preferences. We apply our framework to such games, where the outcomes are evaluated according to several criteria and the payoffs are vector valued. We use the sets of feasible weights to represent the relative importance of the criteria. We demonstrate the applicability of the new solution concept with an ordinal game and a bicriteria Cournot game. (shrink)

This article explores rationalizability issues for finite sets of observations of stochastic choice in the framework introduced by Bandyopadhyay et al. (Journal of Economic Theory, 84(1), 95–110, 1999). It is argued that a useful approach is to consider indirect preferences on budgets instead of direct preferences on commodity bundles. A new rationalizability condition for stochastic choices, “rationalizable in terms of stochastic orderings on the normalized price space” (rsop), is defined. rsop is satisfied if and only if there exists (...) a solution to a linear feasibility problem. The existence of a solution also implies rationalizability in terms of stochastic orderings on the commodity space. Furthermore it is shown that the problem of finding sufficiency conditions for binary choice probabilities to be rationalizable bears similarities to the problem considered here. (shrink)

We consider two scenarios of the Hotelling–Downs model of spatial competition. This setting has typically been explored using pure Nash equilibrium, but this paper uses point rationalizability (Bernheim, Econometrica J Economet Soc 52(4):1007–1028, 1984) instead. Pure Nash equilibrium imposes a correct beliefs assumption, which may rule out perfectly reasonable choices in a game. Point rationalizability does not have this correct beliefs assumption, which makes this solution concept more natural and permissive. The first scenario is the original Hotelling–Downs model (...) with an arbitrary number of agents. Eaton and Lipsey (Rev Econ Stud 42(1):27–49, 1975) used pure Nash equilibrium as their solution concept for this setting. They showed that with three agents, there does not exist a pure Nash equilibrium. We characterize the set of point rationalizable choices for any number of agents and show that as the number of agents increases, the set of point rationalizable choices increases as well. In the second scenario, agents have limited attraction intervals (Feldman et al. Variations on the Hotelling–Downs model. In: Thirtieth AAAI Conference on Artificial Intelligence, pp 496–501, 2016). We show that the set of point rationalizable choices does not depend on the number of agents, apart from this number being odd or even. Furthermore, the set of point rationalizable choices shrinks as the attraction interval increases. (shrink)

Although seemingly irrational choice abounds, the rules governing these mis‐steps that might provide hints about the factors limiting normative behavior are unclear. We consider three experimental tasks, which probe different aspects of non‐normative choice under uncertainty. We argue for systematic statistical, algorithmic, and implementational sources of irrationality, including incomplete evaluation of long‐run future utilities, Pavlovian actions, and habits, together with computational and statistical noise and uncertainty. We suggest structural and functional adaptations that minimize their maladaptive effects.

We examine the maximal-element rationalizability of choice functions with arbitrary domains. While rationality formulated in terms of the choice of greatest elements according to a rationalizing relation has been analyzed relatively thoroughly in the earlier literature, this is not the case for maximal-element rationalizability, except when it coincides with greatest-element rationalizability because of properties imposed on the rationalizing relation. We develop necessary and sufficient conditions for maximal-element rationalizability by itself, and for maximal-element rationalizability in conjunction (...) with additional properties of a rationalizing relation such as reflexivity, completeness, P-acyclicity, quasi-transitivity, consistency and transitivity. (shrink)

I provide a characterization of weakly pseudo-rationalizable choice functions---that is, choice functions rationalizable by a set of acyclic relations---in terms of hyper-relations satisfying certain properties. For those hyper-relations Nehring calls extended preference relations, the central characterizing condition is weaker than (hyper-relation) transitivity but stronger than (hyper-relation) acyclicity. Furthermore, the relevant type of hyper-relation can be represented as the intersection of a certain class of its extensions. These results generalize known, analogous results for path independent choice functions.

In this paper I scrutinize the “rational beliefs” in the concept of rationalizability in strategic games [Bernheim, Pearce ]. I illustrate through an example that a rationalizable strategy may not be supported by a “rational belief”, at least under one plausible interpretation of “rational belief”. I offer an alternative formulation of “rational belief” in the concept of rationalizability, which yields a novel epistemic interpretation of the notion of point-rationalizability.

In strategic situations, agents base actions on knowledge and beliefs. This includes knowledge about others’ strategies and preferences over strategy profiles, but also about other external factors. Bernheim and Pearce in 1984 independently defined the game theoretic solution concept of rationalizability, which is built on the premise that rational agents will only take actions that are the best response to some situation that they consider possible. This accounts for other agents’ rationality as well, limiting the strategies to which a (...) particular agent must respond, enabling further elimination until the strategies stabilize. We seek to generalize rationalizability to account not only for actions, but knowledge of the world as well. This will enable us to examine the interplay between action based and knowledge based rationality. We give an account of what it means for an action to be rational relative to a particular state of affairs, and in turn relative to a state of knowledge. We present a class of games, Epistemic Messaging Games, with a communication stage that clarifies the epistemic state among the players prior to the players’ actions. We use a history based model, which frames individual knowledge in terms of local projections of a global history. With this framework, we give an account of rationalizability for subclasses of EMG. (shrink)

Counterexamples to two results by Stalnaker (Theory and Decision, 1994) are given and a corrected version of one of the two results is proved. Stalnaker's proposed results are: (1) if at the true state of an epistemic model of a perfect information game there is common belief in the rationality of every player and common belief that no player has false beliefs (he calls this joint condition ‘strong rationalizability’), then the true (or actual) strategy profile is path equivalent to a (...) Nash equilibrium; (2) in a normal-form game a strategy profile is strongly rationalizable if and only if it belongs to C8 , the set of profiles that survive the iterative deletion of inferior profiles. (shrink)

An important approach to game theory is to examine the consequences of beliefs that agents may have about each other. This paper investigates respect for public preferences. Consider an agent A who believes that B strictly prefers an option a to an option b. Then A respects B’s preference if A assigns probability 1 to the choice of a given that B chooses a or b. Respect for public preferences requires that if it is common belief that B prefers a (...) to b, then it is common belief that all other agents respect that preference. Along the lines of Blume, Brandenburger and Dekel [3] and Asheim [1], I treat respect for public preferences as a constraint on lexicographic probability systems. The main result is that given respect for public preferences and perfect recall, players choose in accordance with Iterated Backward Inference. Iterated Backward Inference is a procedure that generalizes standard backward induction reasoning for games of both perfect and imperfect information. From Asheim’s characterization of proper rationalizability [1] it follows that properly rationalizable strategies are consistent with respect for public preferences; hence strategies eliminated by Iterated Backward Inference are not properly rationalizable. (shrink)

The idea of confining the idea of ‘rationality’ with that of the ‘choice of best elements’ unnecessarily limits the sense and scope of ‘rationality’. The existing internal consistency conditions that are popularly used in the social choice theory to assess a choice function are insufficient to analyse several choice patterns. The paper tries to address that problem by accepting a broader definition of rationality and characterizes choice behaviours where an individual chooses a k-th best element from set of alternatives, where (...) k is an integer. (shrink)

Welfarism is the view that individual welfare is the only thing that matters. One important contribution of social choice theory has been to provide a precise formulation and axiomatic characterization of welfarism using Amartya Sen's framework of social welfare functionals. This paper is motivated by the observation that the standard formalization of welfarism is too restrictive, since a welfarist social planner need not be committed to maximizing a preference ordering or any other binary relation over alternatives. We therefore provide a (...) characterization of welfarism in a more general choice-functional setting and show that welfarism, so understood, carries no commitment to rationalizability. This characterization is compatible with welfare values having any structure whatsoever. It also sheds light on different formulations of anonymity, revealing only some of these to be fundamental requirements of impartiality. (shrink)

This paper reconsiders Rubinstein's alternating-offer bargaining game with complete information. We define rationalizability and trembling- hand rationalizability (THR) for multi-stage games with observed actions. We show that rationalizability does not exclude perpetual disagreement or delay, but that THR implies a unique solution. Moreover, this unique solution is the unique subgame perfect equilibrium (SPE). Also, we reconsider an extension of Rubinstein's game where a smallest money unit is introduced: THR rules out the non-uniqueness of SPE in some particular (...) case. Finally, we investigate the assumption of boundedly rational players. Perpetual disagreement is excluded, but not delay. Furthermore, we cannot use the asymmetric Nash bargaining solution as an approximation of the alternating-offer bargaining model once the players are boundedly rational ones. (shrink)

This paper examines the existence of strategic solutions to finite normal form games under the assumption that strategy choices can be described as choices among lotteries where players have security- and potential level preferences over lotteries (e.g., Cohen, Theory and Decision, 33, 101–104, 1992, Gilboa, Journal of Mathematical Psychology, 32, 405–420, 1988, Jaffray, Theory and Decision, 24, 169–200, 1988). Since security- and potential level preferences require discontinuous utility representations, standard existence results for Nash equilibria in mixed strategies (Nash, Proceedings of (...) the National Academy of Sciences, 36, 48–49, 1950a, Non-Cooperative Games, Ph.D. Dissertation, Princeton University Press, 1950b) or for equilibria in beliefs (Crawford, Journal of Economic Theory, 50, 127–154, 1990) do not apply. As a key insight this paper proves that non-existence of equilibria in beliefs, and therefore non-existence of Nash equilibria in mixed strategies, is possible in finite games with security- and potential level players. But, as this paper also shows, rationalizable strategies (Bernheim, Econometrica, 52, 1007–1028, 1984, Moulin, Mathematical Social Sciences, 7, 83–102, 1984, Pearce, Econometrica, 52, 1029–1050, 1984) exist for such games. Rationalizability rather than equilibrium in beliefs therefore appears to be a more favorable solution concept for games with security- and potential level players. (shrink)

This paper offers a novel way of reconstructing conceptual change in empirical theories. Changes occur in terms of the structure of the dimensions—that is to say, the conceptual spaces—underlying the conceptual framework within which a given theory is formulated. Five types of changes are identified: (1) addition or deletion of special laws, (2) change in scale or metric, (3) change in the importance of dimensions, (4) change in the separability of dimensions, and (5) addition or deletion of dimensions. Given this (...) classification, the conceptual development of empirical theories becomes more gradual and rationalizable. Only the most extreme type—replacement of dimensions—comes close to a revolution. The five types are exemplified and applied in a case study on the development within physics from the original Newtonian mechanics to special relativity theory. (shrink)

Ever since Sen criticized the notion of internal consistency of choice, there exists a widespread perception that the standard rationalizability approach to the theory of choice has difficulties in coping with the existence of external norms. We introduce a concept of norm-conditional rationalizability and show that external norms can be made compatible with the methods underlying the traditional rationalizability approach. To do so, we characterize norm-conditional rationalizability by means of suitable modifications of revealed preference axioms that (...) are well established in the theory of rational choice on general domains as analysed in contributions by Richter and Hansson, for example. We compare our approach to alternative suggestions that have appeared in response to Sen's criticisms, and we discuss its links to Sen's notion of self-imposed choice constraints. (shrink)

This collection of papers in epistemic logic is oriented towards applications to game theory and individual decision theory. Most of these papers were presented at the inaugural conference of the LOFT (Logic for the Theory and Games and Decisions) conference series, which took place in 1994 in Marseille. Among the notions dealt with are those of common knowledge and common belief, infinite hierarchies of beliefs and belief spaces, logical omniscience, positive and negative introspection, backward induction and rationalizable equilibria in game (...) theory. (shrink)

Recent studies lead to the paradoxical conclusion that the act of affirming one's egalitarian or prosocial values and virtues might subsequently facilitate prejudiced or self-serving behavior, an effect previously referred to as ?moral credentialing.? The present study extends this paradox to the domain of academic misconduct and investigates the hypothesis that such an effect might be limited by the extent to which misbehavior is rationalizable. Using a paradigm designed to investigate deliberative and rationalized forms of cheating (von Hippel, Lakin, & (...) Shakarchi, 2005), we found that when participants had credentialed themselves (vs. a nonclose acquaintance) via a set of hypothetical moral dilemmas, they were more likely to cheat on a subsequent math task, but only if cheating was highly rationalizable. When cheating was difficult to rationalize, moral credentialing had almost no impact on cheating. (shrink)

Actions expressing emotions (such as caressing the clothes of one's dead friend in grief, or tearing apart a photograph out of jealousy) pose a notorious challenge to action theorists. They are thought to be intentional in that they are in some sense under the agent's control. They are not thought to be done for a reason, however, because they cannot be explained by considerations that favor them from the agent's point of view. This seems to be the case, at least, (...) if one subscribes to the Davidsonian standard model of action explanation. So far, philosophers have had three different reactions to this challenge. Rationalists insist that such actions can be rationalized by re-interpreting them. Arationalists insist that there simply is no reasoning process moving agents in emotional states to act. A third reaction questions the intentionality of such actions altogether. All three reactions, however, share the assumption underlying the standard account: if an agent is thought to act for a reason - and hence acts intentionally - he must entertain a desire and some means-end belief reflecting his reasoning process about how to attain what he desires by acting. In this paper, I try to show that this reflective reasoning mechanism is only one way to rationalize an action. Another way is by tracing an action to an unreflective valuing stance respresenting reasons the agent has from his point of view. Emotions are attitudes that help to grasp reasons the agent has. Since emotions come with a strong motivational potential they move the agent to act expressively. But the agent typically allows himself to do so, thereby monitoring the way in which he does it. To the extent that the agent unreflectively acts on a motive that is itself representative of his point of view, his expressive actions can be regarded as rationalizable. (shrink)

An important trend in contemporary epistemology centers on elaborating an old idea of pragmatist pedigree: theory selection (and in general the process of changing view and fixing beliefs) presupposes epistemic values. This article focuses on analyzing the case where epistemic values are indeterminate or when the sources of valuation are multiple (epistemic values like coherence and simplicity need not order options in compatible ways). According to the theory that thus arises epistemic alternatives need not be fully ordered by an underlying (...) notion of information-value and therefore the usual economic techniques of optimization cannot be applied in order to compute optimal contractions. But in cases of this sort it is still rational to maximize, i.e. to deem an option as choosable when it is not known to be worse that any other. We present here basic results about a notion of liberal contraction based on maximizing quasi-orderings. This requires the previous solution of some open problems in the theory of rational choice functions, namely a full characterization of choice functions rationalizable in terms of maximization of quasi-transitive relations. We conclude by discussing the problem of what is the adequate feasible set for calculating maximizing solutions for contraction problems and by considering the epistemological roots of some counterexamples against the most fundamental axioms on choice functions (like α). While the first part of the paper shows how economic insights can be used to improve our understanding of the principles of belief formation and change, this final section reverses this strategy by showing the utility of epistemological insights and techniques for providing invariance conditions capable of regulating the applicability of the pure principles of choice. (shrink)

It has been shown that the Mere Addition Paradox occurs in a choice-functional approach with Path Independence (Stewart R.T., 2021, Path independence and a persistent paradox of population ethics, Journal of Philosophy, forthcoming). The present study is a three-part response to this finding. First, I show that Path Independence is not an essential property leading to this paradox and that logically weaker properties can get the same result. Second, I present a rationalizable choice function that does not yield the paradox. (...) And third, I argue that menu-dependent relations are nicely examined if Path Independence is relaxed to Property $\alpha $ (or equivalently, Contraction Consistency). (shrink)

This article elaborates on foundational issues in the social sciences and their impact on the contemporary theory of belief revision. Recent work in the foundations of economics has focused on the role external social norms play in choice. Amartya Sen has argued in [Sen93] that the traditional rationalizability approach used in the theory of rational choice has serious problems accommodating the role of social norms. Sen's more recent work [Sen96, Sen97] proposes how one might represent social norms in the (...) theory of choice, and in a very recent article [BS07] Walter Bossert and Kotaro Suzumura develop Sen's proposal, offering an extension of the classical theory of choice that is capable of dealing with social norms. The first part of this article offers an alternative functional characterization of the extended notion of rationality employed by Bossert and Suzumura in [BS07]. This characterization, unlike the one offered in [BS07], represents a norm-sensitive notion of rationality in terms of a pure functional constraint unmediated by a notion of revealed preference (something that is crucial for the application developed in the second part of this article). This functional characterization is formulated for general domains (as is Bossert and Suzumura's characterization) and is therefore empirically more applicable than usual characterizations of rationality. Interestingly, the functional constraint we propose is a variant of a condition first entertained in [AGM85] by Carlos Alchourrón, Peter Gärdenfors and David Makinson in the area of belief change. The second part of this article applies the theory developed in the first part to the realm of belief change. We first point out that social norms can be invoked to concoct counterexamples against some postulates of belief change (like postulate (*7)) that are necessary for belief change to be relational. These examples constitute the epistemological counterpart of Sen's counterexamples against condition α in rational choice (as a matter of fact, Rott has showed in [Rot01] that condition and postulate (*7) are mutually mappable). These examples are variants of examples Rott has recently presented in [Rot04]. One of our main goals in this article consists in applying the theory developed in the first part to develop a theory of norm-inclusive belief change that circumvents the counterexamples. We offer a new axiomatization for belief change and we furnish correspondence results relating constraints of rational choice to postulates of belief change. (shrink)

In what follows I try to show that Spinoza modelled his project of rational psychology, in some of its major respects, upon Descartes's metaphysics of matter. I argue further that, like Descartes, who paid for the rationalization of the science of matter the price of having to leave out of his description non-quantifiable qualities, so Spinoza left out of his psychology the non-rationalizable aspects of emotions, i.e. whatever in them could not be subsumed under common notions. He therefore was left (...) with the cognitive aspects of emotions, keeping outside of his report the inner feeling which accompanies them. Spinoza's psychology, I claim, disregards any non-cognitive aspect of emotions. (shrink)

Game-theoretic reasoning pervades economic theory and is used widely in other social and behavioural sciences. An Introduction to Game Theory International Edition, by Martin J. Osborne, presents the main principles of game theory and shows how they can be used to understand economics, social, political, and biological phenomena. The book introduces in an accessible manner the main ideas behind the theory rather than their mathematical expression. All concepts are defined precisely, and logical reasoning is used throughout. The book requires an (...) understanding of basic mathematics but assumes no specific knowledge of economics, political science, or other social or behavioural sciences. Coverage includes the fundamental concepts of strategic games, extensive games with perfect information, and coalitional games; the more advanced subjects of Bayesian games and extensive games with imperfect information; and the topics of repeated games, bargaining theory, evolutionary equilibrium, rationalizability, and maxminimization. The book offers a wide variety of illustrations from the social and behavioural sciences. Each topic features examples that highlight theoretical points and illustrations that demonstrate how the theory may be used. (shrink)

We establish a correspondence between the rationalizability of choice studied in the revealed preference literature and the notion of minimal belief revision captured by the AGM postulates. A choice frame consists of a set of alternatives , a collection E of subsets of (representing possible choice sets) and a function f : E ! 2 (representing choices made). A choice frame is rationalizable if there exists a total pre-order R on..

An individual is said to have a taste for a particular menu, i.e. a subset of available commodities, if he is indifferent between all commodity bundles that contain the same quantity for each commodity which actually is in the menu, whatever the rest of the bundle. Then, a taste is directly defined as a deep property of preferences. As a first result, it is shown that a complete and transitive preference relation over the commodity bundles is equivalent to regular tastes (...) where regularity means that tastes can be derived from a pure qualitative relation between the different commodities. Besides, a preference family based on preference relations corresponding to each particular commodity is said to be rationalizable if there exists a metapreference over commodity bundles which consistently summarizes the preference family and then allows to decide. As a second result, it is shown that if a preference family is rationalizable, then the tastes are organized thanks to a reflexive and transitive qualitative relation between the different commodities. (shrink)

Within the context of extensive-form (or dynamic) games, we use choice frames to represent the initial beliefs of a player as well as her disposition to change those beliefs when she learns that an information set of hers has been reached. As shown in [5], in order for the revision operation to be consistent with the AGM postulates [1], the player’s choice frame must be rationalizable in terms of a total pre-order on the set of histories. We consider four properties (...) of choice frames and show that, together with the hypothesis of a common prior, are necessary and sufficient for the existence of a plausibility order that rationalizes the epistemic state (that is, initial beliefs and disposition to revise those beliefs) of all the players. The plausibility order satisfies the properties introduced in [6] as part of a new definition of perfect Bayesian equilibrium for dynamic games. Thus the present paper provides epistemic foundations for that solution concept. (shrink)

Although the theory of greatest-element rationalizability and maximalelement rationalizability on general domains and without full transitivity of rationalizing relations is well-developed in the literature, these standard notions of rational choice are often considered to be too demanding. An alternative definition of rationality of choice is that of non-deteriorating choice, which requires that the chosen alternatives must be judged at least as good as a reference alternative. In game theory, this definition is well-known under the name of individual rationality (...) when the reference alternative is construed to be the status quo. This alternative form of rationality of individual and social choice is characterized in this paper on general domains and without full transitivity of rationalizing relations. (shrink)

It has been argued that Pareto-improving trade is not as compelling under uncertainty as it is under certainty. The former may involve agents with different beliefs, who might wish to execute trades that are no more than betting. In response, the concept of no-betting Pareto dominance was introduced, requiring that putative Pareto improvements must be rationalizable by some common probabilities, even though the participants’ beliefs may differ. In this paper, we argue that this definition might be too narrow for use (...) when agents are not Bayesian. Agents who face ambiguity might wish to trade in ways that can be justified by common ambiguity, though not necessarily by common probabilities. We accordingly extend the notion of no-betting Pareto dominance to characterize trades than are “no-betting Pareto” ranked according to the maxmin expected utility model. (shrink)

We develop a series of small infinitary epistemic logics to study deductive inference involving intra-/interpersonal beliefs/knowledge such as common knowledge, common beliefs, and infinite regress of beliefs. Specifically, propositional epistemic logics GL are presented for ordinal α up to a given αo so that GL is finitary KDn with n agents and GL allows conjunctions of certain countably infinite formulae. GL is small in that the language is countable and can be constructive. The set of formulae Lα is increasing up (...) to α = ω but stops at ω We present Kripke-completeness for GL for each α ≤ ω, which is proved using the Rasiowa–Sikorski lemma and Tanaka–Ono lemma. GL has a sufficient expressive power to discuss intra-/interpersonal beliefs with infinite lengths. As applications, we discuss the explicit definability of Axioms T, 4, 5, and of common knowledge in GL Also, we discuss the rationalizability concept in game theory in our framework. We evaluate where these discussions are done in the series GL, α ≤ ω. (shrink)

Two scenarios illustrate uses of von Neumann–Morgenstern stable sets in the construction of choice functions. A comparison is made to the construction of choice functions by the selection of maximal elements. A characterization is given of choice functions that are von Neumann–Morgenstern stable set rationalizable by acyclic, asymmetric binary relations. Two examples illustrate the use of the characterization.

We introduce possibilistic beliefs into strategic games, describing a player’s belief about his opponents’ strategies as the set of their strategies he regards as possible. We formulate possibilistic strategic games where each player has preferences over his own strategies conditional on his possibilistic belief about his opponents’ strategies. We define several solution concepts for possibilistic strategic games such as (strict) equilibria, rationalizable sets, iterated elimination of never-best responses, and iterated elimination of strictly dominated strategies, and we study their properties and (...) relationships. We develop a class of possibilistic strategic games called possibilistic supermodular games to relate supermodular games to possibilistic strategic games. Lastly, we discuss a direction of extending our possibilistic framework to games with incomplete information. (shrink)

A bargaining solution is a social compromise if it is metrically rationalizable, i.e., if it has an optimum (depending on the situation, smallest or largest) distance from some reference point. We explore the workability and the limits of metric rationalization in bargaining theory where compromising is a core issue. We demonstrate that many well-known bargaining solutions are social compromises with respect to reasonable metrics. In the metric approach, bargaining solutions can be grounded in axioms on how society measures differences between (...) utility allocations. Using this approach, we provide an axiomatic characterization for the class of social compromises that are based on p-norms and for the attending bargaining solutions. We further show that bargaining solutions which satisfy Pareto Optimality and Individual Rationality can always be metrically rationalized. (shrink)

One of the conceptual limitations of the orthodox game theory is its inability to offer definitive theoretical predictions concerning the outcomes of noncooperative games with multiple rationalizable outcomes. This prompted the emergence of goal-directed theories of reasoning – the team reasoning theory and the theory of hypothetical bargaining. Both theories suggest that people resolve non-cooperative games by using a reasoning algorithm which allows them to identify mutually advantageous solutions of non-cooperative games. The primary aim of this thesis is to enrich (...) the current debate on goaldirected reasoning theories by studying the extent to which the principles of the bargaining theory can be used to formally characterize the concept of mutual advantage in a way which is compatible with some of the conceptually compelling principles of orthodox game theory, such as individual rationality, incentive compatibility, and non-comparability of decision-makers’ personal payoffs. I discuss two formal characterizations of the concept of mutual advantage derived from the aforementioned goal-directed reasoning theories: A measure of mutual advantage developed in collaboration with Jurgis Karpus, which is broadly in line with the notion of mutual advantage suggested by Sugden, and the benefit-equilibrating bargaining solution function, which is broadly in line with the principles underlying Conley and Wilkie’s solution for Pareto optimal point selection problems with finite choice sets. I discuss the formal properties of each solution, as well as its theoretical predictions in a number of games. I also explore each solution concept’s compatibility with orthodox game theory. I also discuss the limitations of the aforementioned goal-directed reasoning theories. I argue that each theory offers a compelling explanation of how a certain type of decision-maker identifies the mutually advantageous solutions of non-cooperative games, but neither of them offers a definitive answer to the question of how people coordinate their actions in non-cooperative social interactions. (shrink)

We relax the assumption that priors are common knowledge, in the standard model of games of incomplete information. We make the realistic assumption that the players are boundedly rational: they base their actions on finite-order belief hierarchies. When the different layers of beliefs are independent of each other, we can retain Harsányi's type-space, and we can define straightforward generalizations of Bayesian Nash Equilibrium and Rationalizability in our context. Since neither of these concepts is quite satisfactory, we propose a hybrid (...) concept, Mirage Equilibrium, providing us with a practical tool to work with inconsistent belief hierarchies. When the different layers of beliefs are correlated, we must enlarge the type-space to include the parametric beliefs. This presents us with the difficulty of the inherent openness of finite belief subspaces. Appealing to bounded rationality once more, we posit that the players believe that their opponent holds a belief hierarchy one layer shorter than they do and we provide alternative generalizations of BNE and Rationalizability. Finally, we show that, when beliefs are degenerate point beliefs, the definition of Mirage Equilibrium coincides with that of the generalized BNE. (shrink)

There is an extensive literature in social choice theory studying the consequences of weakening the assumptions of Arrow's Impossibility Theorem. Much of this literature suggests that there is no escape from Arrow-style impossibility theorems unless one drastically violates the Independence of Irrelevant Alternatives (IIA). In this paper, we present a more positive outlook. We propose a model of comparing candidates in elections, which we call the Advantage-Standard (AS) model. The requirement that a collective choice rule (CCR) be rationalizable by the (...) AS model is in the spirit of but weaker than IIA; yet it is stronger than what is known in the literature as weak IIA (two profiles alike on x, y cannot have opposite strict social preferences on x and y). In addition to motivating violations of IIA, the AS model makes intelligible violations of another Arrovian assumption: the negative transitivity of the strict social preference relation P. While previous literature shows that only weakening IIA to weak IIA or only weakening negative transitivity of P to acyclicity still leads to impossibility theorems, we show that jointly weakening IIA to AS rationalizability and weakening negative transitivity of P leads to no such impossibility theorems. Indeed, we show that several appealing CCRs are AS rationalizable, including even transitive CCRs. (shrink)

There is a collection of exogenously given socially feasible sets, and, for each one of them, each individual in a group chooses from an individually feasible set. The fact that the product of the individually feasible sets is larger than the socially feasible set notwithstanding, there arises no conflict between individual choices. Assuming that individual preferences are random, I characterize rationalizable collective choices.

We characterize seniority rules, also known as lexical dictatorships, under weak consistency constraints on the group’s choice function. These constraints are base triple-acyclicity in the case of binary choices and rationalizability (although not rationality) in the case of choices between an arbitrary number of alternatives. Existing results on these weakened constraints remain silent on the treatment of the group’s most junior individuals and therefore do not yield a complete characterization of seniority rules. We also impose a universal domain, binary (...) strict Pareto optimality, binary Pareto indifference, binary independence of irrelevant alternatives, and the newly introduced condition of conflict resolution. The latter condition requires a social choice rules not to remain indecisive between alternatives for which individuals have conflicting preferences. (shrink)

An important approach to game theory is to examine the consequences of beliefs that rational agents may have about each other. This paper considers respect for public preferences. Consider an agent A who believes that B strictly prefers an option a to an option b. Then A respects B’s preference if A considers the choice of a “infinitely more likely” than the choice of B; equivalently, if A assigns probability 1 to the choice of a given that B chooses a (...) or b. Respect for public preferences requires that if it is common belief that B prefers a to b, then it is common belief that all other agents respect that preference. Along the lines of Blume, Brandenburger and Dekel [4] and Asheim [1], I treat respect for public preferences as a constraint on lexicographic probability systems. The main result is that if respect for public preferences and perfect recall obtains, then players choose in accordance with Iterated Backward Inference. Iterated Backward Inference is a procedure that generalizes standard backward induction reasoning for games of both perfect and imperfect information. From Asheim’s characterization of proper rationalizability [1] it follows that properly rationalizable strategies are consistent with respect for public preferences; hence strategies eliminated by Iterated Backward Inference are not properly rationalizable. (shrink)

We introduce a new solution concept, called correlated-belief equilibrium. The difference to Nash equilibrium is that, while each player has correct marginal conjectures about each opponent, it is not necessarily the case that these marginal conjectures are independent. Then, we provide an epistemic foundation and we relate correlated-belief equilibrium with standard solution concepts, such as rationalizability, correlated equilibrium and conjectural equilibrium.

The coordinated attack scenario and the electronic mail game are two paradoxes of common knowledge. In simple mathematical models of these scenarios, the agents represented by the models can coordinate only if they have common knowledge that they will. As a result, the models predict that the agents will not coordinate in situations where it would be rational to coordinate. I argue that we should resolve this conflict between the models and facts about what it would be rational to do (...) by rejecting common knowledge assumptions implicit in the models. I focus on the assumption that the agents have common knowledge that they are rational, and provide models to show that denying this assumption suffices for a resolution of the paradoxes. I describe how my resolution of the paradoxes fits into a general story about the relationship between rationality in situations involving a single agent and rationality in situations involving many agents. (shrink)

This paper shows how alternative, culturally-determined motivational forces can be substituted for self-interest or rationality in the theory of choice. Several possibilities are considered, including the replacement of preference optimization by such propellants as the selection of the `second best' or the `central' option. It is argued that although all choice behavior, even that consistent with the alternatives considered, can ultimately be understood as satisfying the criterion of rationality, richer and more meaningful explanation is obtained by focusing on culturally significant (...) alternative motivations when the latter turn out, in particular environments, to be more important than self-interest. (shrink)