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Backward Induction versus Forward Induction Reasoning

Author

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  • Andres Perea

    () (Department of Quantitative Economics, Maastricht University, P.O. Box 616, 6200 MD Maastricht, The Netherlands)

Abstract

In this paper we want to shed some light on what we mean by backward induction and forward induction reasoning in dynamic games. To that purpose, we take the concepts of common belief in future rationality (Perea [1]) and extensive form rationalizability (Pearce [2], Battigalli [3], Battigalli and Siniscalchi [4]) as possible representatives for backward induction and forward induction reasoning. We compare both concepts on a conceptual, epistemic and an algorithm level, thereby highlighting some of the crucial differences between backward and forward induction reasoning in dynamic games.

Suggested Citation

  • Andres Perea, 2010. "Backward Induction versus Forward Induction Reasoning," Games, MDPI, Open Access Journal, vol. 1(3), pages 1-21, July.
  • Handle: RePEc:gam:jgames:v:1:y:2010:i:3:p:168-188:d:8864
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    References listed on IDEAS

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    1. Ben-Porath, E., 1992. "Rationality, Nash Equilibrium and Backward Induction in Perfect Information Games," Papers 14-92, Tel Aviv - the Sackler Institute of Economic Studies.
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    Cited by:

    1. Perea, Andr├ęs, 2014. "Belief in the opponents╩╝ future rationality," Games and Economic Behavior, Elsevier, vol. 83(C), pages 231-254.
    2. Bonanno, Giacomo, 2014. "A doxastic behavioral characterization of generalized backward induction," Games and Economic Behavior, Elsevier, vol. 88(C), pages 221-241.
    3. Barbot, Cristina & D'Alfonso, Tiziana, 2014. "Why do contracts between airlines and airports fail?," Research in Transportation Economics, Elsevier, vol. 45(C), pages 34-41.

    More about this item

    Keywords

    epistemic game theory; backward induction; forward induction; algorithms;

    JEL classification:

    • C - Mathematical and Quantitative Methods
    • C7 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory
    • C70 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - General
    • C71 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Cooperative Games
    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games

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