Hypothetical Knowledge and Counterfactual Reasoning*

Abstract: Salmet introduced a notion of hypothetical knowledge and showed how it could be used to capture the type of counterfactual reasoning necessary to force the backwards induction solution in a game of perfect information. He argued that while hypothetical knowledge and the extended information structures used to model it bear some resemblance to the way philosophers have used conditional logic to model counterfactuals, hypothetical knowledge cannot be reduced to conditional logic together with epistemic logic. Here it is shown that in fact hypothetical knowledge can be captured using the standard counterfactual operator ">" and the knowledge operator "K", provided that some assumptions are made regarding the interaction between the two. It is argued, however, that these assumptions are unreasonable in general, as are the axioms that follow from them. Some

implications for game theory are discussed.