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The Refined Best Reply Correspondence and Backward Induction

Author

Listed:
  • Balkenborg Dieter

    (University of Exeter, Exeter, United Kingdom of Great Britain and Northern Ireland)

  • Kuzmics Christoph

    (University of Graz, Graz, Austria)

  • Hofbauer Josef

    (University of Vienna, Vienna, Austria)

Abstract

Fixed points of the (most) refined best reply correspondence, introduced in Balkenborg et al. (2013), in the agent normal form of extensive form games with perfect recall have a remarkable property. They induce fixed points of the same correspondence in the agent normal form of every subgame. Furthermore, in a well-defined sense, fixed points of this correspondence refine even trembling hand perfect equilibria, while, on the other hand, reasonable equilibria that are not weak perfect Bayesian equilibria are fixed points of this correspondence.

Suggested Citation

  • Balkenborg Dieter & Kuzmics Christoph & Hofbauer Josef, 2019. "The Refined Best Reply Correspondence and Backward Induction," German Economic Review, De Gruyter, vol. 20(1), pages 52-66, February.
    • Handle: RePEc:bpj:germec:v:20:y:2019:i:1:p:52-66
    DOI: 10.1111/geer.12136
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    References listed on IDEAS

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    More about this item

    Keywords

    Subgame perfection; Nash equilibrium refinements; backward induction; sequential rationality;
    All these keywords.

    JEL classification:

    • C62 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Existence and Stability Conditions of Equilibrium
    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games

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