On Forward Induction and Evolutionary and Strategic Stability

We analyze which normal form solution concepts capture the notion of forward induction, as defined by E. van Damme (1989, J. Econ. Theory 48, 476–496) 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 (incl...

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Bibliographic Details
Published in:Journal of economic theory 2002-09, Vol.106 (1), p.66-90
Main Authors: Hauk, Esther, Hurkens, Sjaak
Format: Article
Language:English
Subjects:
Economic theory
EES sets
forward induction
Game theory
index theory
strategic stability
Studies
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Summary:We analyze which normal form solution concepts capture the notion of forward induction, as defined by E. van Damme (1989, J. Econ. Theory 48, 476–496) 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) capture this form of forward induction. On the other hand, we show that the evolutionary concept of EES set (J. Swinkels, 1992, J. Econ. Theory 57, 306–332) is always consistent with forward induction. Journal of Economic Literature Classification Number: C72.
ISSN:0022-0531
1095-7235
DOI:10.1006/jeth.2001.2856