Rationalisability
The strategies left once you keep only those that are a best response to some belief about others who are themselves doing the same.
Often misread asAssuming that because a strategy is rationalisable there must be a Nash equilibrium containing it, and so treating the two sets as the same thing.
How to see it
Anything you could justify with a story about them that they could justify back
A strategy is rationalisable if there is some belief about what the others will do that makes it your best option, where that belief is itself made of strategies they could justify in the same way. It is the set of choices supported by a chain of self-consistent stories.
The checkNash additionally requires beliefs to be correct, while rationalisability only requires them to be coherent, which is why it is the larger set.
Try itOf any strategy you want to defend, ask: what exactly do I think they are doing, and what do they think I am doing that makes their move sensible? If you cannot finish the second half of that sentence, the strategy is not rationalisable.
Games that show it
Know these first
Leads on to
Easily confused with
Sources
- Bernheim, B. D. (1984). Econometrica 52(4), 1007-1028.
- Pearce, D. (1984). Econometrica 52(4), 1029-1050.