INTROSPECTION AND EQUILIBRIUM SELECTION IN 2X2 MATRIX GAMES

Game theory lacks an explanation of how players' beliefs are formed an d why they are in equilibrium. This is the reason why it has failed to make significant advances with the problem of equilibrium selection e ven for quite simple games, as 2 x 2 games with two strict Nash equili bria. Our paper models the introspection process by which the selected equilibrium is achieved in this class of games. Players begin their a nalysis with imprecise priors, obtained under weak restrictions formul ated as Axioms. For a large class of reasoning dynamics we obtain as t he solution the risk dominant Nash equilibrium.