Abstract
Most of the results of modern game theory presuppose that the choices rational agents make in noncooperative games are probabilistically independent. In this paper I argue that there is noa priori reason for rational agents to assume probabilistic independence. I introduce a solution concept for noncooperative games called anendogenous correlated equilibrium, which generalizes the Nash equilibrium concept by dropping probabilistic independence. I contrast the endogenous correlated equilibrium with the correlated equilibrium defined by Aumann (1974, 1987). I conclude that in general the endogenous correlated equilibrium concept is a more appropriate solution concept for noncooperative game theory than the less general Nash equilibrium concept. I close by discussing the relationship between endogenous correlated equilibrium and the game solution concept calledrationalizability introduced by Bernheim (1984) and Pearce (1984).
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Vanderschraaf, P. Endogenous correlated equilibria in noncooperative games. Theor Decis 38, 61–84 (1995). https://doi.org/10.1007/BF01083169
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DOI: https://doi.org/10.1007/BF01083169