Forward induction equilibrium
AbstractForward induction is the notion that players in a game assume, even when confronted with an unexpected event, that their opponents chose rationally. It is often motivated by invariance, namely, that the normal form game captures all strategically relevant information. To be consistent with this motivation, this paper proposes a normal form forward induction equilibrium definition by constructing outcome spaces for normal form games. Forward induction equilibrium exists for all finite extensive form games with perfect recall. It may not satisfy backward induction. The lack of set inclusion relationship between forward induction equilibria and extensive form rationalizable strategy profiles illuminates on the differences between the two concepts.
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Bibliographic InfoArticle provided by Elsevier in its journal Games and Economic Behavior.
Volume (Year): 75 (2012)
Issue (Month): 1 ()
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Web page: http://www.elsevier.com/locate/inca/622836
Forward induction; Invariance; Equilibrium refinement;
Find related papers by JEL classification:
- C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
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