Journal Of The Econometric Society

An International Society for the Advancement of Economic
Theory in its Relation to Statistics and Mathematics

Edited by: Guido W. Imbens • Print ISSN: 0012-9682 • Online ISSN: 1468-0262

Econometrica: Sep, 1995, Volume 63, Issue 5

Epistemic Conditions for Nash Equilibrium<1161:ECFNE>2.0.CO;2-C
p. 1161-1180

Adam Brandenburger, Robert Aumann

Sufficient conditions for Nash equilibrium in an $n$-person game are given in terms of what the players know and believe--about the game, and about each other's rationality, actions, knowledge, and beliefs. Mixed strategies are treated not as conscious randomizations, but as conjectures, on the part of other players, as to what a player will do. Common knowledge plays a smaller role in characterizing Nash equilibrium than had been supposed. When $n = 2$, mutual knowledge of the payoff functions, of rationality, and of the conjectures implies that the conjectures form a Nash equilibrium. When $n \geq 3$ and there is a common prior, mutual knowledge of the payoff functions and of rationality, and common knowledge of the conjectures, imply that the conjectures form a Nash equilibrium. Examples show the results to be tight.

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