Equilibrium selection in sequential games with imperfect information

Games with imperfect information often feature multiple equilibria, which depend on beliefs off the equilibrium path. Standard selection criteria such as passive, symmetric or wary beliefs rest on ad hoc restrictions on beliefs. We propose a new selection criterion that imposes no restrictions on be...

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Bibliographic Details
Published in:Games and economic behavior 2018-05, Vol.109, p.465-483
Main Authors: Eguia, Jon X., Llorente-Saguer, Aniol, Morton, Rebecca, Nicolò, Antonio
Format: Article
Language:English
Subjects:
Equilibrium selection
Imperfect information
Multiple equilibria
Passive beliefs
Symmetric beliefs
Vertical contracting
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Summary:Games with imperfect information often feature multiple equilibria, which depend on beliefs off the equilibrium path. Standard selection criteria such as passive, symmetric or wary beliefs rest on ad hoc restrictions on beliefs. We propose a new selection criterion that imposes no restrictions on beliefs: we select the action profile that is supported in equilibrium by the largest set of beliefs. We conduct an experiment to compare the predictive power of the existing and our novel selection criteria in an application on vertical multi-lateral contracting. We find that our criterion outperforms the other selection criteria. •A new criterion to choose equilibria in sequential games with imperfect information.•It selects the action profile that holds for the largest set of possible beliefs.•It performs better than alternatives in an experiment on vertical contracting.
ISSN:0899-8256
1090-2473
DOI:10.1016/j.geb.2018.01.008