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Analysis of Information Feedback and Selfconfirming Equilibrium

Number: 459
Year: 2012
Author(s): P. Battigalli, S. Cerreia-Vioglio, F. Maccheroni, M. Marinacci
Recent research emphasizes the importance of information feedback in situations of recurrent decisions and strategic interaction, showing how it affects the uncertainty that underlies selfconfifirming equilibrium (e.g., Battigalli et al. [9, 2015], Fudenberg and Kamada [13, 2015]). Here, we discuss in detail several properties of this key feature of recurrent interaction and derive relationships. This allows us to elucidate our notion of Maxmin selfconfifirming equilibrium, hereby agents are extremely ambiguity averse, and to compare it with the partially-specified-probabilities (PSP) equilibrium of Lehrer [19, 2012]. Symmetric Maxmin selfconfifirming equilibrium in mixed strategies exists under either observable payoffs,or separable feedback.The latter assumption makes this equilibrium concept essentially equivalent to PSP-equilibrium. If observability of payoffs holds as well, then these equilibrium concepts collapse to mixed Nash equilibrium.

Keywords: Selfconfirming equilibrium, conjectural equilibrium, information feedback, ambiguity aversion, partially specified probabilities
JEL codes: C72, D80