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The Game Take–or–Play: A Paradox of Rationality in Simultaneous Move Games

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  • Ferdinando Colombo

Abstract

We show that paradoxical conclusions similar to those emerging from reasonings of backward induction can arise also in simultaneous move games with incomplete information. In a static setting, these paradoxes are particularly puzzling, because the usual attempts to avoid the backward induction solution do not work. In a dynamic setting, there is a way out of the paradoxes, which hinges on a (possibly endogenous) uncertainty over the past behaviour of the players and does not call for a long time–horizon.

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  • Ferdinando Colombo, 2003. "The Game Take–or–Play: A Paradox of Rationality in Simultaneous Move Games," Bulletin of Economic Research, Wiley Blackwell, vol. 55(2), pages 195-202, April.
    • Handle: RePEc:bla:buecrs:v:55:y:2003:i:2:p:195-202
    DOI: 10.1111/1467-8586.00169
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    1. Velu, C. & Iyer, S., 2008. "The Rationality of Irrationality for Managers: Returns- Based Beliefs and the Traveller’s Dilemma," Cambridge Working Papers in Economics 0826, Faculty of Economics, University of Cambridge.
    2. Kaushik Basu & Leonardo Becchetti & Luca Stanca, 2011. "Experiments with the Traveler’s Dilemma: welfare, strategic choice and implicit collusion," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 37(4), pages 575-595, October.

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