Epistemic Game Theory

Epistemic game theory formalizes assumptions about rationality and mutual beliefs in a formal language, then studies their behavioral implications in games. Specifically, it asks: what do different notions of rationality and different assumptions about what players believe about.. .what others believe about the rationality of players imply regarding play in a game? Being explicit about these assumptions can be important, because solution concepts are often motivated intuitively in terms of players' beliefs and their rationality; however, the epistemic analysis may show limitations in these intuitions, reveal what additional assumptions are hidden in the informal arguments, clarify the concepts or show how the intuitions can be generalized. A further premise of this chapter is that the primitives of the model- namely, the hierarchies of beliefs-should be elicitable, at least in principle. Building upon explicit assumptions about elicitable primitives, we present classical and recent developments in epistemic game theory and provide characterizations of a nonexhaustive, but wide, range of solution concepts.