Beliefs in Network Games (Replaced by CentER DP 2008-05)

W. Kets

Research output: Working paperDiscussion paperOther research output

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Abstract

Networks can have an important effect on economic outcomes. Given the complexity of many of these networks, agents will generally not know their structure. We study the sensitivity of game-theoretical predictions to the specification of players’ (common) prior on the network in a setting where players play a fixed game with their neighbors and only have local information on the network structure. We show that two priors are close in a strategic sense if and only if (1) the priors assign similar probabilities to all events that involve a player and his neighbors, and (2) with high probability, a player believes, given his type, that his neighbors’ conditional beliefs are similar, and that his neighbors believe, given their type, that. . . the conditional beliefs of their neighbors are similar, for any number of iterations. Also, we show that the common but unrealistic assumptions that the size of the network is common knowledge or that the types of players are independent are far from innocuous: if these assumptions are violated, small probability events can have a large effect on outcomes through players’ conditional beliefs.
Original languageEnglish
Place of PublicationTilburg
PublisherMicroeconomics
Number of pages51
Volume2007-46
Publication statusPublished - 2007

Publication series

NameCentER Discussion Paper
Volume2007-46

Fingerprint

Network games
Prediction
Network structure
Economics
Local information
Common knowledge
Common priors

Keywords

  • Network games
  • incomplete information
  • higher order beliefs
  • continuity
  • random networks
  • population uncertainty

Cite this

Kets, W. (2007). Beliefs in Network Games (Replaced by CentER DP 2008-05). (CentER Discussion Paper; Vol. 2007-46). Tilburg: Microeconomics.
Kets, W. / Beliefs in Network Games (Replaced by CentER DP 2008-05). Tilburg : Microeconomics, 2007. (CentER Discussion Paper).
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Kets, W 2007 'Beliefs in Network Games (Replaced by CentER DP 2008-05)' CentER Discussion Paper, vol. 2007-46, Microeconomics, Tilburg.

Beliefs in Network Games (Replaced by CentER DP 2008-05). / Kets, W.

Tilburg : Microeconomics, 2007. (CentER Discussion Paper; Vol. 2007-46).

Research output: Working paperDiscussion paperOther research output

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KW - continuity

KW - random networks

KW - population uncertainty

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Kets W. Beliefs in Network Games (Replaced by CentER DP 2008-05). Tilburg: Microeconomics. 2007. (CentER Discussion Paper).