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Foundations of strategic equilibrium

In: Handbook of Game Theory with Economic Applications

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  • Hillas, John
  • Kohlberg, Elon
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    Abstract

    This chapter examines the conceptual foundations of the concept of strategic equilibrium and its various variants and refinements. The emphasis is very much on the underlying ideas rather than on any technical details.After an examination of some pre-equilibrium ideas, in particular the concept of rationalizability, the concept of strategic (or Nash) equilibrium is introduced. Various interpretations of this concept are discussed and a proof of the existence of such equilibria is sketched.Next, the concept of correlated equilibrium is introduced. This concept can be thought of as retaining the self-enforcing aspect of the idea of equilibrium while relaxing the independence assumption.Most of the remainder of the chapter is concerned with the ideas underlying the refinement of equilibrium: admissibility and iterated dominance; backward induction; forward induction; and ordinality and various invariances to changes in the player set. This leads to a consideration of the concept of strategic stability, a strong refinement satisfying these various ideas.Finally there is a brief examination of the epistemic approach to equilibrium and the relation between strategic equilibrium and correlated equilibrium.

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    This chapter was published in:

  • R.J. Aumann & S. Hart (ed.), 2002. "Handbook of Game Theory with Economic Applications," Handbook of Game Theory with Economic Applications, Elsevier, edition 1, volume 3, number 3, 00.
    This item is provided by Elsevier in its series Handbook of Game Theory with Economic Applications with number 3-42.

    Handle: RePEc:eee:gamchp:3-42

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    Cited by:
    1. Govindan, Srihari & Wilson, Robert B., 2005. "Refinements of Nash Equilibrium," Research Papers 1897, Stanford University, Graduate School of Business.
    2. R.J., AUMANN & Jacques-Henri, DREZE, 2005. "When All is Said and Done, How Should You Play and What Should You Expect ?," Discussion Papers (ECON - Département des Sciences Economiques) 2005021, Université catholique de Louvain, Département des Sciences Economiques.
    3. Govindan, Srihari & Wilson, Robert B., 2007. "Stable Outcomes of Generic Games in Extensive Form," Research Papers 1933r, Stanford University, Graduate School of Business.
    4. Govindan, Srihari & Wilson, Robert B., 2007. "Metastable Equilibria," Research Papers 1934r, Stanford University, Graduate School of Business.
    5. Srihari Govindan & Robert Wilson, 2006. "Sufficient Conditions for Stable Equilibria," Levine's Bibliography 784828000000000267, UCLA Department of Economics.

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