Justification of Stable Equilibria
Two assumptions are used to justify selection of equilibria in stable sets. One assumption requires that a selected set is invariant to addition of redundant strategies. The other is a strong version of backward induction. Backward induction is interpreted as the requirement that behavior strategies in an extensive-form game are sequentially rational and conditionally admissible at every information set; viz., quasi-perfect as defined by van Damme. The strong version requires 'truly' quasi-perfect, in that every action perturbation selects a quasi-perfect equilibrium in the set. For two-player games we also provide an exact characterization of stable sets.
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- Srihari Govindan & Robert Wilson, 2009.
"On Forward Induction,"
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- Blume, Lawrence & Brandenburger, Adam & Dekel, Eddie, 1991. "Lexicographic Probabilities and Choice under Uncertainty," Econometrica, Econometric Society, vol. 59(1), pages 61-79, January.
- Govindan, Srihari & Wilson, Robert, 2001. "Direct Proofs of Generic Finiteness of Nash Equilibrium Outcomes," Econometrica, Econometric Society, vol. 69(3), pages 765-69, May.
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