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The foundation of stability in extensive games with perfect information

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  • Luo, Xiao
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Abstract

This paper studies the decision-theoretic foundation for the notion of stability in the dynamic context of strategic interaction. We formulate and show that common knowledge of rationality implies a "stable" pattern of behavior in extensive games with perfect information. In the "generic" case, our approach is consistent with Aumann's [Aumann, R.J., 1995. Backward induction and common knowledge of rationality. Games and Economic Behavior 8, 6-19] result that common knowledge of rationality leads to the backward induction outcome.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Mathematical Economics.

Volume (Year): 45 (2009)
Issue (Month): 12 (December)
Pages: 860-868

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Handle: RePEc:eee:mateco:v:45:y:2009:i:12:p:860-868

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Web page: http://www.elsevier.com/locate/jmateco

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Keywords: Extensive games Stable sets Rationality Common knowledge;

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