Decision-Theoretic Forward Induction

33 Pages Posted: 21 Feb 2008

See all articles by Srihari Govindan

Srihari Govindan

University of Rochester

Robert Wilson

Stanford Graduate School of Business

Date Written: January 2008

Abstract

A player's pure strategy is called relevant for an outcome of a game in extensive form with perfect recall if there exists a weakly sequential equilibrium with that outcome for which the strategy is an optimal reply at every information set it does not exclude. The outcome satisfies forward induction if it results from a weakly sequential equilibrium in which players' beliefs assign positive probability only to relevant strategies at each information set reached by a profile of relevant strategies. We prove that if there are two players and payoffs are generic then an outcome satisfies forward induction if every game with the same reduced normal form after eliminating redundant pure strategies has a sequential equilibrium with an equivalent outcome. Thus in this case forward induction is implied by decision-theoretic criteria.

JEL Classification: C72

Suggested Citation

Govindan, Srihari and Wilson, Robert B., Decision-Theoretic Forward Induction (January 2008). Stanford University Graduate School of Business Research Paper No. 1986, Available at SSRN: https://ssrn.com/abstract=1095469 or http://dx.doi.org/10.2139/ssrn.1095469

Srihari Govindan

University of Rochester ( email )

Department of Economics
Rochester, NY NY 14627
United States
5852757214 (Phone)

Robert B. Wilson (Contact Author)

Stanford Graduate School of Business ( email )

655 Knight Way
Stanford, CA 94305-5015
United States
650-723-8620 (Phone)
650-725-7979 (Fax)

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
161
Abstract Views
1,156
rank
203,830
PlumX Metrics