Equilibrium selection in sequential games with imperfect information

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

Research output: Contribution to journalArticlepeer-review

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 2018

Keywords

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

ASJC Scopus subject areas

  • Finance
  • Economics and Econometrics

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