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The Dynamic (In)Stability of Backwards Induction Author info | Abstract | Publisher info | Download info | Related research | Statistics R. Cressman
K.H. Schlag
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The evolutionary basis for predicting the backwards induction solution in generic finite extensive-form games with perfect information is examined. Evolution is modelled using the replicator dynamic in combination with rare mutations that introduce a small change in the proportion of each strategy. The criterion for our judgement is whether this dynamic stabilizes over time at the subgame perfect equilibrium outcome. We find that the backwards induction solution is fully justified by this process only in simple games; simple meaning two players, two actions at each node and at most three consecutive decisions in the game. Examples of more complex games are given in which this process does not select between the subgame perfect equilibrium outcome and alternative Nash equilibrium outcomes.
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Paper provided by ESRC Centre on Economics Learning and Social Evolution in its series ELSE working papers with number
027.
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Handle: RePEc:els:esrcls:027Contact details of provider: Web page: http://www.ucl.ac.uk/economics/ELSE/ More information through EDIRC
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Keywords: perfect information extensive-form game Centipede Game back- wards induction replicator dynamic interior asymptotic stability. Other versions of this item:
Find related papers by JEL classification: C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games C79 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Other
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Antonio Cabrales & Giovanni Ponti, .
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Giovanni Ponti, 1996.
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S. Huck & J. Oechssler, .
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