COMMON BELIEF AND THE THEORY OF GAMES WITH PERFECT INFORMATION

The statement “it is common belief that player i is Bayesian rational” (where Bayesian rational means an expected utility maximizer) is defined for two-person games with perfect information. It is shown that in most such games it is not possible for a theory so postulate the Bayesian rationality of all players and to be common belief. This bears directly upon the salience of standard solution concepts such as subgame perfect, and sequential equilibria as well as upon the extensive form rationalizability theories of D. Bernheim (Econometrica52, 1984, 1009-1028) and D. Pearce (Econometrica52, 1984, 1029-1050) which rely heavily on the common belief of Bayesian rationality. Journal of Economic Literature Classification Number: C72. © 1993 Academic Press, Inc.