This September, the ETC will be arranging a reading group covering epistemology in economic theory. The aim is to develop some of the most important ideas from epistemology as applied to general equilibrium and the foundations of game theory to obtain economic insights. The group will meet on Mondays and Thursdays for three weeks to discuss papers (see a tentative list of papers below).

The opening meeting will be held at eleven o'clock on Monday, 10th of September, in the eighth floor lounge of Bunche Hall. In this first meeting we'll agree on what papers people wish to cover and other particulars such as possible time conflicts, etc; we'll review Anscombe and Aumann (1963), Aumann (1976), and Milgrom (1981); see below for links to these and other papers that we could cover.

Adam Brandenburger, from Harvard Business School, has kindly accepted to lead our last meeting on Wednesday, 26th of September to discuss current issues and open questions in the field, with emphasis on interactive epistemology. The paper he will be presenting is The Power of Paradox: Some Recent Developments in Interactive Epistemology. Brandenburger's talk will take place in Bunche 2249 from 3:30 to 5:00.

Since the seminal contribution of Aumann, common knowledge has become a loaded expression. We'll discuss why, and in doing so we'll come across delicate methodological issues and distinctions. For instance, is it always logically consistent to describe a Bayesian game with a complete type space? What economic interpretation should be ascribed to the common priors assumption? What is the value of information? Can there be trade based solely on informational differences? What is the state of the world? Can we construct a model that captures all the possible epistemic states (beliefs) of a game? Does common knowledge of rationality justify Nash equilibrium? Does rationality admit an equilibrium notion at all---and if so which---as a solution concept for games? As we will quickly find out, most of these questions are challenging and interesting. Below is a tentative sample of papers that attempt to answer some such questions.

Aumann (1976), Agreeing to disagree, Annals of Statistics.
Milgrom (1981), Axiomatic Characterization of Common Knowledge, Econometrica.
Anscombe and Aumann (1963), A Definition of Subjective Probability, Annals of Mathematical Statistics.

Hirshleifer (1971), The Private and Social Value of Information and the Reward to Inventive Activity, American Economic Review.
Milgrom and Stokey (1982), Information, Trade, and Common Knowledge, Journal of Economic Theory.
Geanakoplos (1989), Game Theory Without Partitions, and Applications to Speculation and Consensus, Cowles Foundation Discussion Paper No. 914.

Bernheim (1984), Rationalizable Strategic Behavior, Econometrica.
Pearce (1984), Rationalizable Strategic Behavior and the Problem of Perfection, Econometrica.

Aumann (1987), Correlated Equilibrium as an Expression of Bayesian Rationality, Econometrica.
Aumann and Brandenburger (1995), Epistemic Conditions for Nash Equilibrium, Econometrica.

Brandenburger and Dekel (1993), Hierarchies of Beliefs and Common Knowledge, Journal of Economic Theory.
Mertens and Zamir (1985), Formulation of Bayesian Analysis for Games with Incomplete Information, International Journal of Game Theory.
Dekel and Gul (1997), Rationality and Knowledge in Game Theory, in Advances in Economics and Econometrics.

Gul (1997), A Comment on Aumann's Bayesian View, mimeograph.
Battigalli and Siniscalchi (1999b), Hierarchies of Conditional Beliefs and Interactive Epistemology, Journal of Economic Theory.
Brandenburger and Keisler (1999), An Impossibility Theorem on Beliefs in Games, mimeograph.
 

For more information send an e-mail message to David Rahman.