Equilibrium Selection in Sequential Games with Imperfect Information
AbstractGames with imperfect information often feature multiple equilibria, which depend on beliefs off the equilibrium path. Standard selection criteria such as passive beliefs, symmetric beliefs or wary beliefs rest on ad hoc restrictions on beliefs. We propose a new selection criterion that imposes no restrictions on beliefs: we select the action profile that is supported in equilibrium by the largest set of beliefs. We conduct experiments to test the predictive power of the existing and our novel selection criteria in two applications: a game of vertical multi-lateral contracting, and a game of electoral competition. We find that our selection criterion outperforms the other selection criteria.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Queen Mary, University of London, School of Economics and Finance in its series Working Papers with number 717.
Date of creation: Apr 2014
Date of revision:
Equilibrium selection; Passive beliefs; Symmetric beliefs; Vertical contracting; Multiple equilibria; Imperfect information;
Other versions of this item:
- Jon X. Eguia & Aniol Llorente-Saguer & Rebecca Morton & Antonio Nicolò, 2014. "Equilibrium Selection in Sequential Games with Imperfect Information," Working Paper Series of the Max Planck Institute for Research on Collective Goods 2014_04, Max Planck Institute for Research on Collective Goods.
- C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
- D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law
- H41 - Public Economics - - Publicly Provided Goods - - - Public Goods
- D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
This paper has been announced in the following NEP Reports:
- NEP-ALL-2014-04-18 (All new papers)
- NEP-CDM-2014-04-18 (Collective Decision-Making)
- NEP-CTA-2014-04-18 (Contract Theory & Applications)
- NEP-EXP-2014-04-18 (Experimental Economics)
- NEP-GTH-2014-04-18 (Game Theory)
- NEP-HPE-2014-04-18 (History & Philosophy of Economics)
- NEP-MIC-2014-04-18 (Microeconomics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Martin, Stephen & Normann, Hans-Theo & Snyder, Christopher M, 2001. "Vertical Foreclosure in Experimental Markets," RAND Journal of Economics, The RAND Corporation, vol. 32(3), pages 466-96, Autumn.
- Patrick Rey & Thibaud Verge, 2002.
"Bilateral Control with Vertical Contracts,"
The Centre for Market and Public Organisation
02/048, Department of Economics, University of Bristol, UK.
- Selten, Reinhard, 1995.
"An axiomatic theory of a risk dominance measure for bipolar games with linear incentives,"
Games and Economic Behavior,
Elsevier, vol. 8(1), pages 213-263.
- Selten,Reinhard, . "An axiomatic theory of a risk dominance measure for bipolar games with linear incentives," Discussion Paper Serie B 252, University of Bonn, Germany.
- Buehler, B. & Schuett, F., 2012. "Certification and Minimum Quality Standards when Some Consumers are Uninformed," Discussion Paper 2012-040, Tilburg University, Tilburg Law and Economic Center.
- McAfee, R Preston & Schwartz, Marius, 1994. "Opportunism in Multilateral Vertical Contracting: Nondiscrimination, Exclusivity, and Uniformity," American Economic Review, American Economic Association, vol. 84(1), pages 210-30, March.
- Jon X. Eguia & Antonio Nicolò, 2011. "On the Efficiency of Partial Information in Elections," Carlo Alberto Notebooks 234, Collegio Carlo Alberto.
- Urs Fischbacher, 2007. "z-Tree: Zurich toolbox for ready-made economic experiments," Experimental Economics, Springer, vol. 10(2), pages 171-178, June.
- Antonio Cabrales & Walter Garcia Fontes & Massimo Motta, 1997.
"Risk dominance selects the leader. An experimental analysis,"
Economics Working Papers
222, Department of Economics and Business, Universitat Pompeu Fabra.
- Cabrales, Antonio & Garcia-Fontes, Walter & Motta, Massimo, 2000. "Risk dominance selects the leader: An experimental analysis," International Journal of Industrial Organization, Elsevier, vol. 18(1), pages 137-162, January.
- Marco Pagnozzi & Salvatore Piccolo, 2010.
"Vertical Separation with Private Contracts,"
CSEF Working Papers
251, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy, revised 09 Jul 2011.
- Alessandro Gavazza & Alessandro Lizzeri, 2009. "Transparency and Economic Policy," Review of Economic Studies, Oxford University Press, vol. 76(3), pages 1023-1048.
- Harsanyi, John C., 1995.
"A new theory of equilibrium selection for games with complete information,"
Games and Economic Behavior,
Elsevier, vol. 8(1), pages 91-122.
- Harsanyi John C., 1995. "A New Theory of Equilibrium Selection for Games with Incomplete Information," Games and Economic Behavior, Elsevier, vol. 10(2), pages 318-332, August.
- John C. Harsanyi & Reinhard Selten, 1988. "A General Theory of Equilibrium Selection in Games," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262582384, December.
- Schmidt, David & Shupp, Robert & Walker, James M. & Ostrom, Elinor, 2003. "Playing safe in coordination games:: the roles of risk dominance, payoff dominance, and history of play," Games and Economic Behavior, Elsevier, vol. 42(2), pages 281-299, February.
- Catherine C. de Fontenay & Joshua S. Gans, 2004.
"Vertical Integration in the Presence of Upstream Competition,"
Department of Economics - Working Papers Series
904, The University of Melbourne.
- Catherine C. de Fontenay & Joshua S. Gans, 2005. "Vertical Integration in the Presence of Upstream Competition," RAND Journal of Economics, The RAND Corporation, vol. 36(3), pages 544-572, Autumn.
- Joshua Gans & Catherine de Fontenay, 2004. "Vertical Integration in the Presence of Upstream Competition," Econometric Society 2004 North American Winter Meetings 7, Econometric Society.
- Drew Fudenberg & Jean Tirole, 1991. "Game Theory," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262061414, December.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Nick Vriend).
If references are entirely missing, you can add them using this form.