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Journal of Economic Theory
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On Forward Induction and Evolutionary and Strategic Stability

On forward induction and evolutionary and strategic stability
Authors: Esther Hauk; Sjaak Hurkens;

On Forward Induction and Evolutionary and Strategic Stability

Abstract

The authors study the following model. Let \(G = (E,F,u_1,u_2)\) be a two-person non-zero-sum game with finite players' strategy spaces \(E\) and \(F\), and with players' payoff functions \(u_1\) and \(u_2\), respectively. Let \(G^{0}\) be an {outside option game}, that is the following modification of \(G\): First Player 1 decides between two of his new strategies, ``out'' and ``in''. If he chooses ``out'' the game ends with a payoff vector \((x,y)\) to the players. If Player 1 chooses ``in'' the players play the game \(G\). It is assumed that there exists a {forward induction equilibrium} \(s^*\), which is Player 1's preferred Nash equilibrium in \(G\) satisfying \(u_1(s^*) > x > u_1(s)\) for any other equilibrium \(s\) in \(G\). The paper discusses three properties of the sets of Nash equilibria in outside option game \(G^{0}\). The first result is an example of the game \(G^{0}\) with zero index showing that the outside option component \(M\) for this game (the set of Nash equilibria \((s_1,s_2)\) in \(G^{0}\) with \(s_1(``\text{Out}")>0\)) can be essential. Next, it is shown for the same game that the set \(M\) do not have to be hyperstable. The last result says generally that if the outside option component is an equilibrium evolutionary stable set then the game \(G\) is nongeneric.

Country
Spain
Keywords

forward induction equilibrium, strategic stability, hyperstable set, EES sets, index theory, Forward induction, strategic stability, EES sets, index theory, Noncooperative games, ees sets, Microeconomics, essential set, forward induction, jel: jel:C72

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selected citations
These citations are derived from selected sources.
This is an alternative to the "Influence" indicator, which also reflects the overall/total impact of an article in the research community at large, based on the underlying citation network (diachronically).
BIP!Citations provided by BIP!
popularity
This indicator reflects the "current" impact/attention (the "hype") of an article in the research community at large, based on the underlying citation network.
BIP!Popularity provided by BIP!
influence
This indicator reflects the overall/total impact of an article in the research community at large, based on the underlying citation network (diachronically).
BIP!Influence provided by BIP!
impulse
This indicator reflects the initial momentum of an article directly after its publication, based on the underlying citation network.
BIP!Impulse provided by BIP!
13
Average
Top 10%
Average
hybrid