- A Appendix A.1 Alternative behavioral concepts Cursed equilibrium The relation to cursed equilibrium (Eyster and Rabin, 2005) has been discussed in the Introduction: Both concepts assume that players have a mistaken understanding of the type distribution. Given the degree of cursedness Ç ∈ [0,1], cursed players assign weight 1−Ç to the Bayesian case and Ç to the event that their opponents’ types are random and uninformative given the own signal. In the latter case, the opponents play the average strategy Ãi(a−i|ti) = ∑t−i∈T−i Pr(t−i|ti)âˆÂj6=i Ãj(aj|tj), and overall, cursed players expect payoffs ÀCurse i ai|ti,Ã−i = (1−Ç) ∑ t−i∈T−i ∑ a−i∈A−i Pr(t−i|ti) pi (ai,a−i),(ti,t−i) ∠j6=i Ãj(aj|tj) +Ç ∑ t−i∈T−i ∑ a−i∈A−i Pr(t−i|ti) pi (ai,a−i),(ti,t−i)
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- Ãi(a−i|ti). (9) A strategy profile à = (Ã1,...,Ãn) is a Ç-cursed equilibrium if Ãi(|ti) ∈ BRti(Ã−i|ÀCurse i ) for all i and ti. I am not aware of independent evidence supporting “random projection†as in cursed equilibrium (as opposed to projection of the own type), but cursed equilibrium appears well-suited to capture beliefs if type sets are asymmetric. Market interactions with one-sided incomplete information as analyzed in Eyster and Rabin (2005) are a prototypical example. In such asymmetric games, type projection appears less intuitive.
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