Template-Type: ReDIF-Paper 1.0
Author-Name: Burkhard C. Schipper
Author-Name-First: Burkhard C.
Author-Name-Last: Schipper
Author-Workplace-Name: Department of Economics, University of California Davis
Title: Discovery and Equilibrium in Games with Unawareness
Abstract: Equilibrium notions for games with unawareness in the literature cannot be interpreted as steady-states of a learning process because players may discover novel actions during play. In this sense, many games with unawareness are ``self-destroying'' as a player's representation of the game may change after playing it once. We define discovery processes where at each state there is an extensive-form game with unawareness that together with the players' play determines the transition to possibly another extensive-form game with unawareness in which players are now aware of actions that they have discovered. A discovery process is rationalizable if players play extensive-form rationalizable strategies in each game with unawareness. We show that for any game with unawareness there is a rationalizable discovery process that leads to a self-confirming game that possesses a self-confirming equilibrium in extensive-form rationalizable strategies. This notion of equilibrium can be interpreted as steady-state of both a discovery and learning process.
Length: 54
File-URL: https://repec.dss.ucdavis.edu/files/P1aH5yEwfkA51D4okFh8kuZ5/sceunaw25.pdf
File-Format: application/pdf
Number: 340
Classification-JEL: C72, D83
KeyWords: Self-confirming equilibrium, conjectural equilibrium, extensive-form rationalizability, unawareness, extensive-form games, equilibrium, learning, discovery
Creation-Date: 20210505
Handle: RePEc:cda:wpaper:340