Does backwards induction imply subgame perfection?

Carlos Alós-Ferrer, Klaus Ritzberger

Research output: Contribution to journalArticle

Abstract

In finite games subgame perfect equilibria are precisely those that are obtained by a backwards induction procedure. In large extensive form games with perfect information this equivalence does not hold: Strategy combinations fulfilling the backwards induction criterion may not be subgame perfect in general. The full equivalence is restored only under additional (topological) assumptions. This equivalence is in the form of a one-shot deviation principle for large games, which requires lower semi-continuous preferences. As corollaries we obtain one-shot deviation principles for particular classes of games, when each player moves only finitely often or when preferences are representable by payoff functions that are continuous at infinity.

Original languageEnglish (US)
Pages (from-to)19-29
Number of pages11
JournalGames and Economic Behavior
Volume103
DOIs
StatePublished - May 2017

Keywords

  • Backwards induction
  • Large extensive form games
  • One-shot deviation principle
  • Perfect information
  • Subgame perfection

ASJC Scopus subject areas

  • Finance
  • Economics and Econometrics

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