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Equilibrium Selection in Sequential Games with Imperfect Information

  • Jon X. Eguia

    ()

    (University of Bristol)

  • Aniol Llorente-Saguer

    ()

    (Queen Mary University of London)

  • Rebecca Morton

    ()

    (New York University)

  • Antonio Nicolò

    ()

    (University of Manchester)

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.

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File URL: http://econ.qmul.ac.uk/research/workingpapers/2014/Items/docs/717.pdf
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Paper provided by Queen Mary University of London, School of Economics and Finance in its series Working Papers with number 717.

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Date of creation: Apr 2014
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Handle: RePEc:qmw:qmwecw:wp717
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  1. Antonio Cabrales & Walter Garcia Fontes & Massimo Motta, 1997. "Risk dominance selects the leader. An experimental analysis," Economics Working Papers 222, Department of Economics and Business, Universitat Pompeu Fabra.
  2. Marco Pagnozzi & Salvatore Piccolo, 2012. "Vertical Separation with Private Contracts," Economic Journal, Royal Economic Society, vol. 122(559), pages 173-207, 03.
  3. Jon X. Eguia & Antonio Nicolò, 2011. "On the Efficiency of Partial Information in Elections," Carlo Alberto Notebooks 234, Collegio Carlo Alberto.
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  7. Schmidt, David & Shupp, Robert & Walker, James M. & Ostrom, Elinor, 2003. "Playing safe in coordination games:: the roles of risk dominance, payoff dominance, and history of play," Games and Economic Behavior, Elsevier, vol. 42(2), pages 281-299, February.
  8. 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, June.
  9. Alessandro Gavazza & Alessandro Lizzeri, 2009. "Transparency and Economic Policy," Review of Economic Studies, Oxford University Press, vol. 76(3), pages 1023-1048.
  10. Urs Fischbacher, 2007. "z-Tree: Zurich toolbox for ready-made economic experiments," Experimental Economics, Springer, vol. 10(2), pages 171-178, June.
  11. Drew Fudenberg & Jean Tirole, 1991. "Game Theory," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262061414, June.
  12. Joshua Gans & Catherine de Fontenay, 2004. "Vertical Integration in the Presence of Upstream Competition," Econometric Society 2004 North American Winter Meetings 7, Econometric Society.
  13. Harsanyi John C., 1995. "A New Theory of Equilibrium Selection for Games with Incomplete Information," Games and Economic Behavior, Elsevier, vol. 10(2), pages 318-332, August.
  14. McAfee, R Preston & Schwartz, Marius, 1994. "Opportunism in Multilateral Vertical Contracting: Nondiscrimination, Exclusivity, and Uniformity," American Economic Review, American Economic Association, vol. 84(1), pages 210-30, March.
  15. Martin, Stephen & Normann, Hans-Theo & Snyder, Christopher M, 2001. "Vertical Foreclosure in Experimental Markets," RAND Journal of Economics, The RAND Corporation, vol. 32(3), pages 466-96, Autumn.
  16. Buehler, B. & Schuett, F., 2012. "Certification and Minimum Quality Standards when Some Consumers are Uninformed," Discussion Paper 2012-040, Tilburg University, Tilburg Law and Economic Center.
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