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Justification of Stable Equilibria

Author

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  • Govindan, Srihari

    (U of Iowa)

  • Wilson, Robert B.

    (Stanford U)

Abstract

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.

Suggested Citation

  • Govindan, Srihari & Wilson, Robert B., 2005. "Justification of Stable Equilibria," Research Papers 1896, Stanford University, Graduate School of Business.
  • Handle: RePEc:ecl:stabus:1896
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    References listed on IDEAS

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