Chapter

Common Knowledge

James Bergin

in Microeconomic Theory

Published in print May 2005 | ISBN: 9780199280292
Published online July 2005 | e-ISBN: 9780191602498 | DOI: http://dx.doi.org/10.1093/0199280290.003.0016
 Common Knowledge

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Introduces common knowledge is introduced. The definition of common knowledge is given. Convergence of beliefs under iterative announcement is discussed, and the implications of common knowledge of an aggregate statistic described. In a game theoretic framework, it is show how lack of common knowledge can lead to cooperative equilibrium in a finitely repeated prisoners’ dilemma game. Finally, a no-trade theorem is given.

Keywords: common knowledge and backward induction; common knowledge of a random variable; information partitions; no-trade theorems

Chapter.  7642 words.  Illustrated.

Subjects: Microeconomics

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