On the Belief (In-)Dependence of Sequential Equilibria
8 Pages Posted: 18 Aug 2011
Date Written: August 18, 2011
It is a well known fact that for any finite extensive form game G there is a strategy profile σ which, together with an appropriate system of beliefs μ, constitutes a sequential equilibrium of G (Kreps and Wilson, 1982). However, as we demonstrate in this paper, there are sequential equilibria that crucially rely on a very specfic choice of μ for the adoption of which there is no compelling reason except that μ supports the particular equilibrium. From a methodological point of view, however, it seems questionable to give beliefs an equilibrating role. In order to account for this fact, we define the notion of belief-independent equilibria and outcomes. However, such equilibria and outcomes do not exist in general. Thus, while not questioning the idea of sequential equilibrium, the argument suggests that the common emphasis of existence results for belief-based equilibrium concepts may be misleading.
Keywords: Beliefs, Sequential Equilibrium, Existence
JEL Classification: C72
Suggested Citation: Suggested Citation