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On the Inconsistency of Equilibrium Refinement

  • Werner Güth

Consistency and optimality together with converse consistency provide an illuminating and novel characterization of the equilibrium concept (Peleg and Tijs, 1996). But (together with non-emptiness) they preclude refinements of the equilibrium notion and selection of a unique equilibrium (Norde et al., 1996). We suggest two escape routes: By generalizing the concept of strict equilibrium we question the practical relevance of the existence requirement for refinements. To allow for equilibrium selection we suggest more complex reduced games which capture the inclinations of „players who already left“.

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Paper provided by Max Planck Institute of Economics, Strategic Interaction Group in its series Papers on Strategic Interaction with number 2002-48.

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Handle: RePEc:esi:discus:2002-48
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  1. Dufwenberg, M. & Norde, H.W. & Reijnierse, J.H. & Tijs, S.H., 2001. "The consistency principle for set-valued solutions and a new direction for normative game theory," Other publications TiSEM a92b40c8-7807-47db-8abd-a, Tilburg University, School of Economics and Management.
  2. Spencer, Barbara J. & Brander, James A., 1992. "Pre-commitment and flexibility : Applications to oligopoly theory," European Economic Review, Elsevier, vol. 36(8), pages 1601-1626, December.
  3. Harsanyi, John C., 1994. "Games with Incomplete Information," Nobel Prize in Economics documents 1994-1, Nobel Prize Committee.
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  7. Norde, H.W. & Potters, J.A.M. & Reijnierse, J.H. & Vermeulen, D., 1996. "Equilibrium selection and consistency," Other publications TiSEM a5c0103f-677a-4352-8bd1-7, Tilburg University, School of Economics and Management.
  8. Werner GÜTH & Georg KIRCHSTEIGER & Klaus RITZBERGER, 1995. "Imperfectly Observable Commitments in n-Player Games," Vienna Economics Papers vie9507, University of Vienna, Department of Economics.
  9. 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.
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  11. Peleg, B. & Tijs, S.H., 1996. "The consistency principle for games in strategic form," Other publications TiSEM fc27db2d-b84c-44ba-95a1-0, Tilburg University, School of Economics and Management.
  12. Lensberg, Terje, 1988. "Stability and the Nash solution," Journal of Economic Theory, Elsevier, vol. 45(2), pages 330-341, August.
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  15. Robert Aumann & Adam Brandenburger, 2014. "Epistemic Conditions for Nash Equilibrium," World Scientific Book Chapters, in: The Language of Game Theory Putting Epistemics into the Mathematics of Games, chapter 5, pages 113-136 World Scientific Publishing Co. Pte. Ltd..
  16. 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.
  17. van Damme, Eric, 1998. "On the State of the Art in Game Theory: An Interview with Robert Aumann," Games and Economic Behavior, Elsevier, vol. 24(1-2), pages 181-210, July.
  18. Sadanand, Asha & Sadanand, Venkatraman, 1996. "Firm Scale and the Endogenous Timing of Entry: a Choice between Commitment and Flexibility," Journal of Economic Theory, Elsevier, vol. 70(2), pages 516-530, August.
  19. Reinhard Selten, 1974. "Reexamination of the Perfectness Concept for Equilibrium Points in Extensive Games," Center for Mathematical Economics Working Papers 023, Center for Mathematical Economics, Bielefeld University.
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