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Credible equilibrium

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  • Mehmet S. Ismail

Abstract

Credible equilibrium is a solution concept that imposes a stronger credibility notion than subgame perfect equilibrium. A credible equilibrium is a refinement of subgame perfect equilibrium such that if a threat in a subgame g is "credible," then it must also be credible in every subgame g' that is "equivalent" to g. I show that (i) a credible equilibrium exists in multi-stage games, and (ii) if every stage game has a unique Nash equilibrium, then the credible equilibrium is unique even in infinite horizon multi-stage games. Moreover, in perfect information games, credible equilibrium is equivalent to subgame perfect equilibrium.

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  • Mehmet S. Ismail, 2022. "Credible equilibrium," Papers 2206.05241, arXiv.org.
    • Handle: RePEc:arx:papers:2206.05241
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    File URL: http://arxiv.org/pdf/2206.05241
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