This paper provides a new solution to the epistemic paradox of belief-instability, a problem of rational choice which has recently received considerable attention (versions of the problem have been discussed by — among others — Tyler Burge, Earl Conee, and Roy Sorensen). The problem involves an ideally rational agent who has good reason to believe the truth of something of the form:[Ap] p if and only if it is not the case that I accept or believe p.

Although the notion of common or mutual belief plays a crucial role in game theory, economics and social philosophy, no thoroughly representational account of it has yet been developed. In this paper, I propose two desiderata for such an account, namely, that it take into account the possibility of inconsistent data without portraying the human mind as logically and mathematically omniscient. I then propose a definition of mutual belief which meets these criteria. This account takes seriously the existence of computational (...) limitations. Finally, I point out that the epistemic logic (or theory) needed to make the definition work is subject to the Kaplan/Montague Paradox of the Knower. I argue that this is not a defect of the account, and I discuss briefly the bearing of recent work on the paradox of the Liar upon this problem. (shrink)