SFB 303 Discussion Paper No. A - 094

Author: Leininger, Wolfgang
Title: Strategic Equilibrium in Sequential Games
Abstract: The present analysis focuses on out of equilibrium moves (this statement requires that a certain equilibrium has been proposed) that are compatible with another sequential equilibrium of the game and argues that if such moves occur a prominent role should be assigned to beliefs that support the equilibria with which the given out of equilibrium move is compatible. We define "credibility" of such moves in an inductive way and reject any sequential equilibrium of a game as strategically not "stable" if at least one player can deviate from it ("to another equilibrium") by a credible out of equilibrium move. A sequential equilibrium in which no player has such a move is called a strategic equilibrium. The main result is that for any extensive form with generic pay- offs strategic equilibrium exists.
The paper is organized as follows: Section II motivates our analysis heuristically by looking at the backwards induction principle under perfect information. Section III develops a formal definition of strategic equilibrium for games with perfect recall and provides an existence proof. The last section contains a discussion of the relationship to other solution concepts; in particular to the notion of 'perfect sequential equilibrium' proposed in Grossman and Perry (1985).
Creation-Date: January 1987
Unfortunately this paper is not available online. Please contact us to order a hardcopy.

SFB 303 Homepage

12.10.1999, Webmaster