Extended Proper Equilibrium
Journal of Economic Theory, volume 194, 2021 [10.1016/j.jet.2021.105258]
60 Pages Posted: 13 Sep 2017 Last revised: 21 Mar 2022
Date Written: April 26, 2021
Abstract
We introduce extended proper equilibrium, which refines proper equilibrium (Myerson, 1978) by adding across-player restrictions on trembles. This refinement coincides with proper equilibrium in games with two players but adds new restrictions in games with three or more players. One implication of these additional restrictions is that any tremble that is costless in equilibrium is regarded by all as more likely than any costly tremble, even one by a different player. At least one extended proper equilibrium exists in every finite game. The refinement can also be characterized in terms of a symmetric, meta-version of the game in which players originate from a common pool: if these players tremble symmetrically and in the way of proper equilibrium, then the induced play in the original game is an extended proper equilibrium.
Keywords: equilibrium refinement, trembles, extended proper equilibrium, proper equilibrium, generalized second-price auction
JEL Classification: C72, D44
Suggested Citation: Suggested Citation