Equilibrium selection in sequential games with imperfect information

Jon X. Eguia, Aniol Llorente-Saguer, Rebecca Morton, Antonio Nicolò

Research output: Contribution to journalArticle

Abstract

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.

Original languageEnglish (US)
Pages (from-to)465-483
Number of pages19
JournalGames and Economic Behavior
Volume109
DOIs
StatePublished - May 1 2018

Fingerprint

Equilibrium selection
Imperfect information
Sequential game
Selection criteria
Predictive power
Contracting
Experiment
Multiple equilibria
Ad hoc

Keywords

  • Equilibrium selection
  • Imperfect information
  • Multiple equilibria
  • Passive beliefs
  • Symmetric beliefs
  • Vertical contracting

ASJC Scopus subject areas

  • Finance
  • Economics and Econometrics

Cite this

Equilibrium selection in sequential games with imperfect information. / Eguia, Jon X.; Llorente-Saguer, Aniol; Morton, Rebecca; Nicolò, Antonio.

In: Games and Economic Behavior, Vol. 109, 01.05.2018, p. 465-483.

Research output: Contribution to journalArticle

Eguia, Jon X. ; Llorente-Saguer, Aniol ; Morton, Rebecca ; Nicolò, Antonio. / Equilibrium selection in sequential games with imperfect information. In: Games and Economic Behavior. 2018 ; Vol. 109. pp. 465-483.
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