CBESS Discussion Paper 09-01

This paper presents a new iterative procedure for solving finite noncooperative games, the reasoning-based expected utility procedure (RBEU), and compares this with existing iterative procedures. RBEU deletes more strategies than iterated deletion of strictly dominated strategies, while avoiding the conceptual problems associated with iterated deletion of weakly dominated strategies. It uses a sequence of “accumulation” and “deletion” operations to categorise strategies as permissible and impermissible; strategies may remain uncategorised when the procedure halts. RBEU and related “categorisation procedures” can be interpreted as tracking successive steps in players’ own reasoning. JEL classification codes C72 Short title The reasoning-based EU procedure Acknowledgements We are grateful for comments on earlier versions to a referee and an associate editor; to Giacomo Bonnano, Adam Brandenburger and Michael Mandler; and to participants in various seminars, conferences and workshops at which we have presented the paper. Sugden’s work was supported by the Economic and Social Research Council (award no. RES 051 27 0146).