Paper #408

Title:

On forward induction and evolutionary and strategic stability

Authors:

Esther Hauk and Sjaak Hurkens

Date:

July 1999 (Revised: September 1999)

Abstract:

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.

Keywords:

Forward induction, strategic stability, EES sets, index theory

JEL codes:

C72

Area of Research:

Microeconomics

Published in:

Journal of Economic Theory, Volume 106, Number 1, September 2002, pp. 66-90(25)

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