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Rationalizability

In game theory, rationalizability is a solution concept.


The general idea is to provide the weakest constraints on
players while still requiring that players are rational and
this rationality is common knowledge among the players.
It is more permissive than Nash equilibrium. Both require that players respond optimally to some belief about
their opponents actions, but Nash equilibrium requires
that these beliefs be correct while rationalizability does
not. Rationalizability was rst dened, independently, by
Bernheim (1984) and Pearce (1984).

not rationalizable.
Conversely, for two-player games, the set of all rationalizable strategies can be found by iterated elimination of
strictly dominated strategies. For this method to hold
however, one also needs to consider strict domination by
mixed strategies. Consider the game on the right with
payos of the column player omitted for simplicity. Notice that b is not strictly dominated by either t or m
in the pure strategy sense, but it is still dominated by a
strategy that would mix t and m with probability of
each equal to 1/2. This is due to the fact that given any
belief about the action of the column player, the mixed
strategy will always yield higher expected payo.[1] This
implies that b is not rationalizable.

Denition

Moreover, b is not a best response to either L or R


or any mix of the two. This is because an action that is not
rationalizable can never be a best response to any opponents strategy (pure or mixed). This would imply another
version of the previous method of nding rationalizable
strategies as those that survive the iterated elimination of
strategies that are never a best response (in pure or mixed
sense).

Given a normal-form game, the rationalizable set of actions can be computed as follows: Start with the full action set for each player. Next, remove all actions which
are never a best reply to any belief about the opponents
actions -- the motivation for this step is that no rational
player could choose such actions. Next, remove all actions which are never a best reply to any belief about the
opponents remaining actions -- this second step is justied because each player knows that the other players
are rational. Continue the process until no further actions
are eliminated. In a game with nitely many actions, this
process always terminates and leaves a non-empty set of
actions for each player. These are the rationalizable actions.

In games with more than two players, however, there may


be strategies that are not strictly dominated, but which can
never be the best response. By the iterated elimination of
all such strategies one can nd the rationalizable strategies
for a multiplayer game.

3 Rationalizability and Nash equilibria

Constraints on beliefs

Consider a simple coordination game (the payo matrix


is to the right). The row player can play a if she can reasonably believe that the column player could play A, since
a is a best response to A. She can reasonably believe that
the column player can play A if it is reasonable for the
column player to believe that the row player could play a.
He can believe that she will play a if it is reasonable for
him to believe that she could play a, etc.

It can be easily proved that every Nash equilibrium is a


rationalizable equilibrium; however, the converse is not
true. Some rationalizable equilibria are not Nash equilibria. This makes the rationalizability concept a generalization of Nash equilibrium concept.

As an example, consider the game matching pennies pictured to the right. In this game the only Nash equilibrium
This provides an innite chain of consistent beliefs that is row playing h and t with equal probability and column
result in the players playing (a, A). This makes (a, A) a playing H and T with equal probability. However, all the
rationalizable pair of actions. A similar process can be pure strategies in this game are rationalizable.
repeated for (b, B).
Consider the following reasoning: row can play h if it is
reasonable for her to believe that column will play H. Column can play H if its reasonable for him to believe that
row will play t. Row can play t if it is reasonable for her
to believe that column will play T. Column can play T if

As an example where not all strategies are rationalizable,


consider a prisoners dilemma pictured to the left. Row
player would never play c, since c is not a best response
to any strategy by the column player. For this reason, c is
1

it is reasonable for him to believe that row will play h (beginning the cycle again). This provides an innite set of
consistent beliefs that results in row playing h. A similar
argument can be given for row playing t, and for column
playing either H or T.

See also
Self-conrming equilibrium

Footnotes

[1] Gibbons, Robert (1992). A Primer in Game Theory. pp.


3233.

References
Bernheim, D. (1984) Rationalizable Strategic Behavior. Econometrica 52: 1007-1028.
Fudenberg, Drew and Jean Tirole (1993) Game Theory. Cambridge: MIT Press.
Pearce, D. (1984) Rationalizable Strategic Behavior
and the Problem of Perfection. Econometrica 52:
1029-1050.
Ratcli, J. (19921997) lecture notes on game theory, 2.2: Iterated Dominance and Rationalizability

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