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Sufficient Conditions for Stable Equilibria
Theoretical Economics (2006)
  • Srihari Govindan, University of Iowa
  • Robert B Wilson, Stanford University
Abstract

A refinement of the set of Nash equilibria that satisfies two assumptions is shown to select a subset that is stable in the sense defined by Kohlberg and Mertens. One assumption requires that a selected set is invariant to adjoining redundant strategies and the other is a strong version of backward induction. Backward induction is interpreted as the requirement that each player's strategy is sequentially rational and conditionally admissible at every information set in an extensive-form game with perfect recall, implemented here by requiring that the equilibrium is quasi-perfect. The strong version requires `truly' quasi-perfect in that each strategy perturbation refines the selection to a quasi-perfect equilibrium in the set. An exact characterization of stable sets is provided for two-player games.

Keywords
  • game theory,
  • equilibrium selection,
  • stability
Disciplines
Publication Date
June, 2006
Citation Information
Srihari Govindan and Robert B Wilson. "Sufficient Conditions for Stable Equilibria" Theoretical Economics Vol. 1 Iss. 2 (2006)
Available at: http://works.bepress.com/wilson_robert/13/