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On Forward Induction

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  • Srihari Govindan
  • Robert Wilson

Abstract

A player's pure strategy is called relevant for an outcome of a game in extensive form with perfect recall if there exists a weakly sequential equilibrium with that outcome for which the strategy is an optimal reply at every information set it does not exclude. The outcome satisfies forward induction if it results from a weakly sequential equilibrium in which players' beliefs assign positive probability only to relevant strategies at each information set reached by a profile of relevant strategies. We prove that if there are two players and payoffs are generic, then an outcome satisfies forward induction if every game with the same reduced normal form after eliminating redundant pure strategies has a sequential equilibrium with an equivalent outcome. Thus in this case forward induction is implied by decision-theoretic criteria. Copyright 2009 The Econometric Society.

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Bibliographic Info

Article provided by Econometric Society in its journal Econometrica.

Volume (Year): 77 (2009)
Issue (Month): 1 (01)
Pages: 1-28

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Handle: RePEc:ecm:emetrp:v:77:y:2009:i:1:p:1-28

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References

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Citations

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Cited by:
  1. Heller, Yuval & Winter, Eyal, 2013. "Rule Rationality," MPRA Paper 48746, University Library of Munich, Germany.
  2. Srihari Govindan & Robert Wilson, 2009. "On Forward Induction," Econometrica, Econometric Society, vol. 77(1), pages 1-28, 01.
  3. Srihari Govindan & Robert Wilson, 2008. "Axiomatic Theory of Equilibrium Selection in Signalling Games with Generic Payoffs," Levine's Working Paper Archive 122247000000002381, David K. Levine.
  4. Inderst, Roman & Pfeil, Sebastian, 2010. "Securitization and Compensation in Financial Institutions," CEPR Discussion Papers 8089, C.E.P.R. Discussion Papers.
  5. Srihari Govindan & Robert Wilson, 2012. "Axiomatic Equilibrium Selection for Generic Two‐Player Games," Econometrica, Econometric Society, vol. 80(4), pages 1639-1699, 07.
  6. Oikonomou, V.K. & Jost, J, 2013. "Periodic strategies and rationalizability in perfect information 2-Player strategic form games," MPRA Paper 48117, University Library of Munich, Germany.
  7. Govindan, Srihari & Wilson, Robert B., 2008. "Decision-Theoretic Forward Induction," Research Papers 1986, Stanford University, Graduate School of Business.
  8. Govindan, Srihari & Wilson, Robert B., 2005. "Justification of Stable Equilibria," Research Papers 1896, Stanford University, Graduate School of Business.

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