We show that if the set of subgame perfect equilibrium payoffs of a stage game is convexified by the introduction of public random variables, then forward induction loses all its power as an argument for refining Nash equilibrium. We establish that our argument does not depend on a convenient choice of off-equilibrium path beliefs. Journal of Economic Literature Classification Number: C72.
All Science Journal Classification (ASJC) codes
- Economics and Econometrics