Forward induction and public randomization

Faruk Gul; David G. Pearce

doi:10.1006/jeth.1996.0075

Forward induction and public randomization

Faruk Gul, David G. Pearce

Economics

Research output: Contribution to journal › Article › peer-review

5 Scopus citations

Abstract

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.

Original language	English (US)
Pages (from-to)	43-64
Number of pages	22
Journal	Journal of Economic Theory
Volume	70
Issue number	1
DOIs	https://doi.org/10.1006/jeth.1996.0075
State	Published - Jul 1996

All Science Journal Classification (ASJC) codes

Economics and Econometrics

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10.1006/jeth.1996.0075

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abstract = "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.",

author = "Faruk Gul and Pearce, {David G.}",

note = "Funding Information: * We thank Ennio Stacchetti for his help and Dilip Abreu for discussions that led us to this project. Both authors gratefully acknowledge financial support from the Alfred P. Sloan Foundation and the National Science Foundation.",

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AB - 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.

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Forward induction and public randomization

Abstract

All Science Journal Classification (ASJC) codes

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