Axiomatic Equilibrium Selection for Generic Two‐Player Games

We apply three axioms adapted from decision theory to refinements of the Nash equilibria of games with perfect recall that select connected closed sub- sets called solutions. No player uses a weakly dominated strategy in an equilibrium in a solution. Each solution contains a quasi-perfect equilibrium and thus a sequential equilibrium in strategies that provide conditionally admissible optimal continuations from information sets. A refinement is immune to embedding a game in a larger game with additional players provided the original players' strategies and payoffs are preserved, i.e. solutions of a game are the same as those induced by the solutions of any larger game in which it is embedded. For games with two players and generic payoffs, we prove that these axioms characterize each solution as an essential component of equilibria in undominated strategies, and thus a stable set as defined by Mertens (1989).(This abstract was borrowed from another version of this item.)(This abstract was borrowed from another version of this item.)