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On forward induction and evolutionary and strategic stability

  • Esther Hauk
  • Sjaak Hurkens

We analyze which normal form solution concepts capture the notion of forward induction, as defined by van Damme (JET, 1989) in the class of generic two player normal form games preceded by an outside option. We find that none of the known strategic stability concepts (including Mertens stable sets and hyperstable sets) captures this form of forward induction. On the other hand, we show that the evolutionary concept of EES set (Swinkels, JET, 1992) is always consistent with forward induction.

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Paper provided by Department of Economics and Business, Universitat Pompeu Fabra in its series Economics Working Papers with number 408.

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Date of creation: Jul 1999
Date of revision: Sep 1999
Handle: RePEc:upf:upfgen:408
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  1. K. Ritzberger & J. Weibull, 2010. "Evolutionary Selection in Normal-Form Games," Levine's Working Paper Archive 452, David K. Levine.
  2. David Kreps & Robert Wilson, 1999. "Reputation and Imperfect Information," Levine's Working Paper Archive 238, David K. Levine.
  3. Govindan, Srihari & Robson, Arthur J., 1998. "Forward Induction, Public Randomization, and Admissibility," Journal of Economic Theory, Elsevier, vol. 82(2), pages 451-457, October.
  4. Swinkels, J., 1991. "Evolutionary Stability with Equilibrium Entrants," Papers 9, Stanford - Institute for Thoretical Economics.
  5. van Damme,Eric, 1987. "Stable equilibria and forward induction," Discussion Paper Serie A 128, University of Bonn, Germany.
  6. Robert Wilson & Srihari Govindan, 1997. "Uniqueness of the index for Nash equilibria of two-player games," Economic Theory, Springer, vol. 10(3), pages 541-549.
  7. Mailath, G. & Samuelson, L. & Swinkels, J., 1991. "Extensive form reasoning in normal form games," Discussion Paper 1991-30, Tilburg University, Center for Economic Research.
  8. Matsui, Akihiko, 1992. "Best response dynamics and socially stable strategies," Journal of Economic Theory, Elsevier, vol. 57(2), pages 343-362, August.
  9. Basu, K. & Weibull, J.W., 1990. "Strategy Subsets Closed Under Rational Behaviour," Papers 479, Stockholm - International Economic Studies.
  10. Govindan Srihari, 1995. "Stability and the Chain Store Paradox," Journal of Economic Theory, Elsevier, vol. 66(2), pages 536-547, August.
  11. Gul, Faruk & Pearce, David G., 1996. "Forward Induction and Public Randomization," Journal of Economic Theory, Elsevier, vol. 70(1), pages 43-64, July.
  12. Binmore, K. & Samuelson, L., 1995. "Evolutionary Drift and Equilibrium Selection," Working papers 9529, Wisconsin Madison - Social Systems.
  13. Hillas, John, 1990. "On the Definition of the Strategic Stability of Equilibria," Econometrica, Econometric Society, vol. 58(6), pages 1365-90, November.
  14. E. Kohlberg & J.-F. Mertens, 1998. "On the Strategic Stability of Equilibria," Levine's Working Paper Archive 445, David K. Levine.
  15. Ritzberger, Klaus, 1994. "The Theory of Normal Form Games form the Differentiable Viewpoint," International Journal of Game Theory, Springer, vol. 23(3), pages 207-36.
  16. Binmore, Ken & Samuelson, Larry, 1999. "Evolutionary Drift and Equilibrium Selection," Review of Economic Studies, Wiley Blackwell, vol. 66(2), pages 363-93, April.
  17. Swinkels, Jeroen M., 1992. "Evolution and strategic stability: From maynard smith to kohlberg and mertens," Journal of Economic Theory, Elsevier, vol. 57(2), pages 333-342, August.
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