Affiliation:
1. School of Economics, Shanghai University of Finance and Economics, 777 Guoding Rd., Shanghai, China200433
Abstract
AbstractForward induction, as defined by Govindan and Wilson (2009. “On Forward Induction.” Econometrica 77:1–28), places a local dominance condition on off-equilibrium beliefs that restricts relevant strategy profiles for an equilibrium outcome to be infinitely more likely than profiles that include irrelevant strategies. Meanwhile, it places no global dominance restrictions and thus leaves open the possibility that a dominated strategy is deemed more likely than strategies dominating it. This paper defines strong forward induction, which improves upon forward induction. We also develop a solution concept called strong forward induction equilibrium that is obtained from iterative application of the strong forward induction criterion.
Subject
General Economics, Econometrics and Finance
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