Abstract
We propose a model of reasoning in dynamic games in which a player, at each information set, holds a conditional belief about his own future choices and the opponents’future choices. These conditional beliefs are assumed to be cautious, that is, the player never completely rules out any feasible future choice by himself or the opponents. We impose the following key conditions: (a) a player always believes that he will choose rationally in the future, (b) a player always believes that his opponents will choose rationally in the future, and (c) a player deems his own mistakes in…nitely less likely than the opponents’mistakes. Common belief in these conditions leads to the new concept of perfect quasi-perfect rationalizability. We show that perfectly quasi-perfectly rationalizable strategies exist in every …nite dynamic game. We prove, moreover, that perfect quasi-perfect rationalizability constitutes a re…nement of both perfect rationalizability (a rationalizability analogue to Selten’s (1975) perfect equilibrium) and quasi-perfect rationalizability (a rationalizability analogue to van Damme’s (1984) quasiperfect equilibrium).