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On Forward Induction and Evolutionary and Strategic Stability

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  • Hauk, Esther
  • Hurkens, Sjaak

Abstract

We analyze which normal form solution concepts capture the notion of forward induction, as defined by van Damme (JET, 1989) in the class of generic two player normal form games preceded by an outside option. We find that none of the known strategic stability concepts (including Mertens stable sets and hyperstable sets) captures this form of forward induction. On the other hand, we show that the evolutionary concept of EES set (Swinkels, JET, 1992) is always consistent with forward induction.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Economic Theory.

Volume (Year): 106 (2002)
Issue (Month): 1 (September)
Pages: 66-90

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Handle: RePEc:eee:jetheo:v:106:y:2002:i:1:p:66-90

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Web page: http://www.elsevier.com/locate/inca/622869

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References

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  1. Swinkels, J., 1991. "Evolutionary Stability with Equilibrium Entrants," Papers 9, Stanford - Institute for Thoretical Economics.
  2. repec:att:wimass:9529 is not listed on IDEAS
  3. Mailath, G.J. & Samuelson, L. & Swinkels, J., 1991. "extensive Form Reasoning in Normal Form Games," Papers 9130, Tilburg - Center for Economic Research.
  4. Basu, K. & Weibull, J.W., 1990. "Strategy Subsets Closed Under Rational Behaviour," Papers 479, Stockholm - International Economic Studies.
  5. Kreps, David M. & Wilson, Robert, 1982. "Reputation and imperfect information," Journal of Economic Theory, Elsevier, vol. 27(2), pages 253-279, August.
  6. E. Kohlberg & J.-F. Mertens, 1998. "On the Strategic Stability of Equilibria," Levine's Working Paper Archive 445, David K. Levine.
  7. Ritzberger, Klaus, 1994. "The Theory of Normal Form Games form the Differentiable Viewpoint," International Journal of Game Theory, Springer, vol. 23(3), pages 207-36.
  8. Matsui, Akihiko, 1992. "Best response dynamics and socially stable strategies," Journal of Economic Theory, Elsevier, vol. 57(2), pages 343-362, August.
  9. van Damme,Eric, 1987. "Stable equilibria and forward induction," Discussion Paper Serie A 128, University of Bonn, Germany.
  10. Swinkels, Jeroen M., 1992. "Evolution and strategic stability: From maynard smith to kohlberg and mertens," Journal of Economic Theory, Elsevier, vol. 57(2), pages 333-342, August.
  11. Robert Wilson & Srihari Govindan, 1997. "Uniqueness of the index for Nash equilibria of two-player games," Economic Theory, Springer, vol. 10(3), pages 541-549.
  12. Govindan, Srihari & Robson, Arthur J., 1998. "Forward Induction, Public Randomization, and Admissibility," Journal of Economic Theory, Elsevier, vol. 82(2), pages 451-457, October.
  13. Hillas, John, 1990. "On the Definition of the Strategic Stability of Equilibria," Econometrica, Econometric Society, vol. 58(6), pages 1365-90, November.
  14. Binmore, K. & Samuelson, L., 1997. "Evolutionary Drift and Equilibrium Selection," Working papers 9729r, Wisconsin Madison - Social Systems.
  15. Ritzberger, Klaus & Weibull, Jörgen W., 1993. "Evolutionary Selection in Normal Form Games," Working Paper Series 383, Research Institute of Industrial Economics.
  16. Binmore, Ken & Samuelson, Larry, 1999. "Evolutionary Drift and Equilibrium Selection," Review of Economic Studies, Wiley Blackwell, vol. 66(2), pages 363-93, April.
  17. Govindan Srihari, 1995. "Stability and the Chain Store Paradox," Journal of Economic Theory, Elsevier, vol. 66(2), pages 536-547, August.
  18. Gul, Faruk & Pearce, David G., 1996. "Forward Induction and Public Randomization," Journal of Economic Theory, Elsevier, vol. 70(1), pages 43-64, July.
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Citations

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Cited by:
  1. Srihari Govindan & Robert Wilson, 2006. "On Forward Induction," Levine's Working Paper Archive 321307000000000618, David K. Levine.
  2. Jordi Brandts & Antonio Cabrales & Gary Charness, 2003. "Forward induction and the excess capacity puzzle: An experimental investigation," Working Papers 76, Barcelona Graduate School of Economics.
  3. Demichelis, Stefano & Ritzberger, Klaus, 2003. "From evolutionary to strategic stability," Journal of Economic Theory, Elsevier, vol. 113(1), pages 51-75, November.
  4. Demichelis, Stefano & Ritzberger, Klaus & Swinkels, Jeroen M., 2002. "The Simple Geometry of Perfect Information Games," Economics Series 115, Institute for Advanced Studies.

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