Abstract
In certain finite extensive games with perfect information, Cristina Bicchieri (1989) derives a logical contradiction from the assumptions that players are rational and that they have common knowledge of the theory of the game. She argues that this may account for play outside the Nash equilibrium. She also claims that no inconsistency arises if the players have the minimal beliefs necessary to perform backward induction. We here show that another contradiction can be derived even with minimal beliefs, so there is no paradox of common knowledge specifically. These inconsistencies do not make play outside Nash equilibrium plausible, but rather indicate that the epistemic specification must incorporate a system for belief revision. Whether rationality is common knowledge is not the issue.
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Dufwenberg, M., Lindén, J. Inconsistencies in extensive games. Erkenntnis 45, 103–114 (1996). https://doi.org/10.1007/BF00226373
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DOI: https://doi.org/10.1007/BF00226373