Beyond normal form invariance: first mover advantage in two-stage games with or without predictable cheap talk

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Hammond, Peter J. (2008)
  • Publisher: University of Warwick, Department of Economics
  • Subject: HB
    acm: TheoryofComputation_GENERAL | ComputingMilieux_PERSONALCOMPUTING | TheoryofComputation_MISCELLANEOUS
    arxiv: Computer Science::Computer Science and Game Theory

Von Neumann (1928) not only introduced a fairly general version of the extensive form game concept. He also hypothesized that only the normal form was relevant to rational play. Yet even in Battle of the Sexes, this hypothesis seems contradicted by players' actual behaviour in experiments. Here a refined Nash equilibrium is proposed for games where one player moves first, and the only other player moves second without knowing the first move. The refinement relies on a tacit understanding of the only credible and straightforward perfect Bayesian equilibrium in a corresponding game allowing a predictable direct form of cheap talk.
  • References (37)
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