Bayesian foundations of Nash equilibrium behaviour

Abstract

This is part of a larger project to investigate the Bayesian foundations of non-cooperative solution concepts. Elsewhere Bernheim and Pearce prove that common knowledge of Bayesian rationality is not enough to justify the non-cooperative solution concept defined by Nash. Here several alternative behavioural assumptions are considered. In general the coordination required to achieve a Nash equilibrium is very strong. Not only Bayesian rationality, but also the actions taken, have to be common knowledge . For particular kinds of games the coordination required is not as strong.