There's an discontinuous difference between mutual knowledge and common knowledge.
- There's an discontinuous difference between mutual knowledge and common knowledge.
- Mutual knowledge is knowledge that everyone individually has.
- Common knowledge is knowledge that everyone and individually has… and everyone knows everyone knows.
- In the mutual state, you don't know if an action you take will be supported by others.
- But in the common state, you know it will be.
- Before it's common knowledge, spontaneous coordination is hard.
- After it's common knowledge, spontaneous coordination becomes the default.
- The emperor having no clothes is an example.
- Bubbles are another example.
- Even if everyone privately thinks we're in a bubble, if it's not yet common knowledge, then if you short the bubble you'll get wiped out.