not rationalizable.
Conversely, for two-player games, the set of all rationalizable strategies can be found by iterated elimination of
strictly dominated strategies. For this method to hold
however, one also needs to consider strict domination by
mixed strategies. Consider the game on the right with
payos of the column player omitted for simplicity. Notice that b is not strictly dominated by either t or m
in the pure strategy sense, but it is still dominated by a
strategy that would mix t and m with probability of
each equal to 1/2. This is due to the fact that given any
belief about the action of the column player, the mixed
strategy will always yield higher expected payo.[1] This
implies that b is not rationalizable.
Denition
Given a normal-form game, the rationalizable set of actions can be computed as follows: Start with the full action set for each player. Next, remove all actions which
are never a best reply to any belief about the opponents
actions -- the motivation for this step is that no rational
player could choose such actions. Next, remove all actions which are never a best reply to any belief about the
opponents remaining actions -- this second step is justied because each player knows that the other players
are rational. Continue the process until no further actions
are eliminated. In a game with nitely many actions, this
process always terminates and leaves a non-empty set of
actions for each player. These are the rationalizable actions.
Constraints on beliefs
As an example, consider the game matching pennies pictured to the right. In this game the only Nash equilibrium
This provides an innite chain of consistent beliefs that is row playing h and t with equal probability and column
result in the players playing (a, A). This makes (a, A) a playing H and T with equal probability. However, all the
rationalizable pair of actions. A similar process can be pure strategies in this game are rationalizable.
repeated for (b, B).
Consider the following reasoning: row can play h if it is
reasonable for her to believe that column will play H. Column can play H if its reasonable for him to believe that
row will play t. Row can play t if it is reasonable for her
to believe that column will play T. Column can play T if
it is reasonable for him to believe that row will play h (beginning the cycle again). This provides an innite set of
consistent beliefs that results in row playing h. A similar
argument can be given for row playing t, and for column
playing either H or T.
See also
Self-conrming equilibrium
Footnotes
References
Bernheim, D. (1984) Rationalizable Strategic Behavior. Econometrica 52: 1007-1028.
Fudenberg, Drew and Jean Tirole (1993) Game Theory. Cambridge: MIT Press.
Pearce, D. (1984) Rationalizable Strategic Behavior
and the Problem of Perfection. Econometrica 52:
1029-1050.
Ratcli, J. (19921997) lecture notes on game theory, 2.2: Iterated Dominance and Rationalizability
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