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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. Bagwell, Kyle, 1995. "Commitment and observability in games," Games and Economic Behavior, Elsevier, vol. 8(2), pages 271-280.
  2. Harsanyi, John C, 1995. "Games with Incomplete Information," American Economic Review, American Economic Association, vol. 85(3), pages 291-303, June.
  3. Lensberg, Terje, 1988. "Stability and the Nash solution," Journal of Economic Theory, Elsevier, vol. 45(2), pages 330-341, August.
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  9. 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.
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  11. Nash, John, 1953. "Two-Person Cooperative Games," Econometrica, Econometric Society, vol. 21(1), pages 128-140, April.
  12. 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.
  13. 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.
  14. 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.
  15. Dufwenberg, Martin & Norde, Henk & Reijnierse, Hans & Tijs, Stef, 1998. "The Consistency Principle for Set-valued Solutions and a New Direction for Normative Game Theory," Working Paper Series 1998:11, Uppsala University, Department of Economics.
  16. Thomson, A., 1989. "The Consistency Principle," RCER Working Papers 192, University of Rochester - Center for Economic Research (RCER).
  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. Pearce, David G, 1984. "Rationalizable Strategic Behavior and the Problem of Perfection," Econometrica, Econometric Society, vol. 52(4), pages 1029-50, July.
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