Perfect Bayesian Equilibrium(cont) Requirement 3 Belief based on Bayes rule): At the information sets on the equilibrium path, beliefs are determined by Bayes rule and the players equilibrium strategies Requirement 4(Reasonable belief): At the information sets off the equilibrium path beliefs are determined by bayes rule and the players equilibrium strategies where possible Definition: A perfect Bayesian equilibrium consists of strategies and beliefs satisfying requirement 1 through 4Perfect Bayesian Equilibrium (cont’) • Requirement 3 (Belief based on Bayes’ rule): At the information sets on the equilibrium path, beliefs are determined by Bayes’ rule and the players’ equilibrium strategies • Requirement 4 (Reasonable belief): At the information sets off the equilibrium path, beliefs are determined by Bayes’ rule and the players’ equilibrium strategies where possible • Definition: A perfect Bayesian equilibrium consists of strategies and beliefs satisfying requirement 1 through 4 6