The foundation of stability in extensive games with perfect information |
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Authors: | Xiao Luo |
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Affiliation: | Department of Economics, National University of Singapore, Singapore 117570, Singapore |
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Abstract: | This paper studies the decision-theoretic foundation for the notion of stability in the dynamic context of strategic interaction. We formulate and show that common knowledge of rationality implies a “stable” pattern of behavior in extensive games with perfect information. In the “generic” case, our approach is consistent with Aumann’s [Aumann, R.J., 1995. Backward induction and common knowledge of rationality. Games and Economic Behavior 8, 6–19] result that common knowledge of rationality leads to the backward induction outcome. |
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Keywords: | C70 C71 D81 |
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