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Equilibrium Selection in Sequential Games with Imperfect Information

Author

Listed:
  • Jon X. Eguia

    (University of Bristol)

  • Aniol Llorente-Saguer

    (Queen Mary University of London)

  • Rebecca Morton

    (New York University)

  • Antonio Nicolò

    (University of Manchester)

Abstract

Games with imperfect information often feature multiple equilibria, which depend on beliefs off the equilibrium path. Standard selection criteria such as passive beliefs, symmetric beliefs or wary beliefs rest on ad hoc restrictions on beliefs. We propose a new selection criterion that imposes no restrictions on beliefs: we select the action profile that is supported in equilibrium by the largest set of beliefs. We conduct experiments to test the predictive power of the existing and our novel selection criteria in two applications: a game of vertical multi-lateral contracting, and a game of electoral competition. We find that our selection criterion outperforms the other selection criteria.

Suggested Citation

  • Jon X. Eguia & Aniol Llorente-Saguer & Rebecca Morton & Antonio Nicolò, 2014. "Equilibrium Selection in Sequential Games with Imperfect Information," Working Papers 717, Queen Mary University of London, School of Economics and Finance.
  • Handle: RePEc:qmw:qmwecw:717
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    Cited by:

    1. Moellers, Claudia & Normann, Hans-Theo & Snyder, Christopher M., 2017. "Communication in vertical markets: Experimental evidence," International Journal of Industrial Organization, Elsevier, vol. 50(C), pages 214-258.
    2. Eguia, Jon X. & Llorente-Saguer, Aniol & Morton, Rebecca & Nicolò, Antonio, 2018. "Equilibrium selection in sequential games with imperfect information," Games and Economic Behavior, Elsevier, vol. 109(C), pages 465-483.
    3. Normann, Hans-Theo & Möllers, Claudia & Snyder, Christopher M., 2015. "Communication in Vertically Related Markets: Experimental Evidence," Annual Conference 2015 (Muenster): Economic Development - Theory and Policy 112842, Verein für Socialpolitik / German Economic Association.
    4. Eguia, Jon X. & Nicolo, Antonio, 2019. "Information and targeted spending," Theoretical Economics, Econometric Society, vol. 14(2), May.
    5. Jeanine Miklós-Thal & Greg Shaffer, 2016. "Naked Exclusion with Private Offers," American Economic Journal: Microeconomics, American Economic Association, vol. 8(4), pages 174-194, November.
    6. Maria Carmela Ceparano & Jacqueline Morgan, 2015. "Equilibria Under Passive Beliefs for Multi-leader-follower Games with Vertical Information: Existence Results," CSEF Working Papers 417, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy, revised 09 Jan 2017.

    More about this item

    Keywords

    Equilibrium selection; Passive beliefs; Symmetric beliefs; Vertical contracting; Multiple equilibria; Imperfect information;

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law
    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior

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