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I analyze a sequential bargaining model in which players are optimistic about their bargaining power (measured as the probability of making offers), but learn as they play the game. I show that there exists a uniquely predetermined settlement date, such that in equilibrium the players always reach an agreement at that date, but never reach one before it.(More)
Rational agents with differing priors tend to be overoptimistic about their chances of success. In particular, an agent who tries to choose the action that is most likely to succeed, is more likely to choose an action of which he overestimated, rather than underestimated, the likelihood of success. After studying the comparative statics of this mechanism, I(More)
Present economic theories make a common-knowledge assumption that implies that the first or the second-order beliefs determine all higher-order beliefs. We analyze the role of such closing assumptions at finite orders by instead allowing higher orders to vary arbitrarily. Assuming that the space of underlying uncertainty is sufficiently rich, we show that(More)
We provide a characterization of when an action is rationalizable in a binary action coordination game in terms of beliefs and higher order beliefs. The characterization sheds light on when a global game yields a unique outcome. In particular, we can separate those features of the noisy information approach to global games that are important for uniqueness(More)
We show that in any game that is continuous at infinity, if a plan of action   is rationalizable for a type   , then there are perturbations of   for which following   for an arbitrarily long future is the only rationalizable plan. One can pick the perturbation from a finite type space with common prior. As an application we prove an unusual folk(More)
For a finite set of actions and a rich set of fundamentals, consider the interim rationalizable actions on the universal type space, endowed with the usual product topology. (1) Generically, there exists a unique rationalizable action profile. (2) Every model can be approximately embedded in a dominance-solvable model. (3) For any given rationalizable(More)
An agent with a misperception may have an evolutionary advantage when his misperception and its behavioral implications are recognized by others. In such situations evolutionary forces can lead to misperceptions, yielding " irrational behavior , " such as the play of strictly dominated strategies. We point out that this reasoning relies on the assumption of(More)
a r t i c l e i n f o a b s t r a c t Available online xxxx JEL classification: C72 C73 Keywords: Higher-order beliefs Incomplete information Robustness Sensitivity Universal type space We analyze " nice " games (where action spaces are compact intervals, utilities continuous and strictly concave in own action), which are used frequently in classical(More)