The Scope of the Hypothesis of Bayesian Equilibrium

Creators: Ledyard, John O.

Abstract

What behavior can be explained as the Bayes equilibrium of some game? The main finding is almost anything. Given any Bayesian (coordination) game with positive priors and given any vector of nondominated strategies, there is an increasing transformation of each utility function such that the given vector of strategies is a Bayes (Nash) equilibrium of the transformed game. Any nondominated behavior can be rationalized as Bayes equilibrium behavior. Some comments on the implications of these results for game theory are included.

Additional Information

Revised. Originally dated to June 1984. This paper is an extensive revision of one presented in the Theory workshop at Caltech and at the Institute for Mathematics and Its Applications at the University of Minnesota. I thank both sets of participants for their suggestions and comments. I especially thank Kim Border and Charles Plott who asked the right questions at the right time. The revision of the first version has benefited from the insightful and careful comments of Steve Matthews, Mark Satterthwaite, Robert Wilson and a good referee. Finally, I thank the intransigent referee of Easley-Ledyard, whose misguided refusal to consider the behavior proposed in that as reasonable led me to the research reported here. Published as Ledyard, John O. "The scope of the hypothesis of Bayesian equilibrium." Journal of Economic Theory 39.1 (1986): 59-82.

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