Abstract
Conjectural equilibria and rationalizability are introduced in order to analyze extensive games with incomplete information when the common prior assumption is dropped. We provide a macroeconomic example which clearly illustrates the crucial role of players’ structural and behavioral conjectures: different equilibrium and disequilibrium paths (some with keynesian type inefficiencies) are generated by different expectations patterns. Convergence of rationalizable paths to some conjectural equilibrium may occur, but not necessarily to a full information-rational expectations one.
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Battigalli, P., Guaitoli, D. (1997). Conjectural Equilibria and Rationalizability in a Game with Incomplete Information. In: Battigalli, P., Montesano, A., Panunzi, F. (eds) Decisions, Games and Markets. Studies in Risk and Uncertainty, vol 8. Springer, Boston, MA. https://doi.org/10.1007/978-1-4615-6337-2_4
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DOI: https://doi.org/10.1007/978-1-4615-6337-2_4
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