Endogenous correlated equilibria in noncooperative games

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7 Scopus citations

Abstract

Most of the results of modern game theory presuppose that the choices rational agents make in noncooperative games are probabilistically independent. In this paper I argue that there is no a priori reason for rational agents to assume probabilistic independence. I introduce a solution concept for noncooperative games called an endogenous correlated equilibrium, which generalizes the Nash equilibrium concept by dropping probabilistic independence. I contrast the endogenous correlated equilibrium with the correlated equilibrium defined by Aumann (1974, 1987). I conclude that in general the endogenous correlated equilibrium concept is a more appropriate solution concept for noncooperative game theory than the less general Nash equilibrium concept. I close by discussing the relationship between endogenous correlated equilibrium and the game solution concept called rationalizability introduced by Bernheim (1984) and Pearce (1984).

Original languageEnglish (US)
Pages (from-to)61-84
Number of pages24
JournalTheory and Decision
Volume38
Issue number1
DOIs
StatePublished - Jan 1995
Externally publishedYes

Keywords

  • common knowledge
  • correlated rationalizability
  • Endogenous correlated equilibrium
  • exogenous correlated equilibrium

ASJC Scopus subject areas

  • General Decision Sciences
  • Developmental and Educational Psychology
  • Arts and Humanities (miscellaneous)
  • Applied Psychology
  • General Social Sciences
  • Economics, Econometrics and Finance(all)
  • Computer Science Applications

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