An epistemic characterization of generalized backward induction
AbstractWe investigate the extension of backward-induction to von Neumann extensive games (where information sets have a synchronous structure) and provide an epistemic characterization of it. Extensions of the idea of backward-induction were proposed by Penta (2009) and later by Perea (2013), who also provided an epistemic characterization in terms of the notion of common belief in future rationality. The epistemic characterization we propose, although differently formulated, is conceptually the same as Perea's and so is the generalization of backward induction. The novelty of this contribution lies in the epistemic models that we use, which are dynamic, behavioral models where strategies play no role and the only beliefs that are specified are the actual beliefs of the players at the time of choice. Thus our analysis is free of (objective or subjective) counterfactuals.
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Bibliographic InfoPaper provided by University of California, Davis, Department of Economics in its series Working Papers with number 132.
Date of creation: 11 Mar 2013
Date of revision:
Dynamic game; imperfect information; backward induction; belief; rationality; behavioral model;
Find related papers by JEL classification:
- C7 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-03-30 (All new papers)
- NEP-EVO-2013-03-30 (Evolutionary Economics)
- NEP-GTH-2013-03-30 (Game Theory)
- NEP-MIC-2013-03-30 (Microeconomics)
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- Asheim, Geir B. & Perea, Andres, 2005. "Sequential and quasi-perfect rationalizability in extensive games," Games and Economic Behavior, Elsevier, vol. 53(1), pages 15-42, October.
- Pierpaolo Battigalli & Alfredo Di Tillio & Dov Samet, 2011. "Strategies and interactive beliefs in dynamic games," Working Papers 375, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
- Shimoji, Makoto & Watson, Joel, 1998. "Conditional Dominance, Rationalizability, and Game Forms," Journal of Economic Theory, Elsevier, vol. 83(2), pages 161-195, December.
- Perea, Andrés, 2006. "Epistemic Foundations for Backward Induction: An Overview," Research Memoranda 036, Maastricht : METEOR, Maastricht Research School of Economics of Technology and Organization.
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