IDEAS home Printed from https://ideas.repec.org/a/gok/ijdcv1/v3y2013i1p63-70.html
   My bibliography  Save this article

Finite dynamic games with full rationality and inconsistently aligned beliefs: Can the N-person backward induction deliver a solution?

Author

Listed:
  • Varoufakis, Yanis

Abstract

Recent work has cast considerable doubt on the plausibility of specific assumptions about how rational agents form out-of-equilibrium beliefs in finite extensive games in which beliefs are induced backwards. The point is that the resulting consistently aligned beliefs are incoherent in view of the counterfactuals they rely on. This paper asks: how will the possibility of inconsistently aligned beliefs affect the manner in which rational players play such games? It shows that, provided beliefs are aligned monotonically, the more interesting qualitative features of the conventional approach remain unchanged.

Suggested Citation

  • Varoufakis, Yanis, 2013. "Finite dynamic games with full rationality and inconsistently aligned beliefs: Can the N-person backward induction deliver a solution?," International Journal of Development and Conflict, Gokhale Institute of Politics and Economics, vol. 3(1), pages 63-70.
    • Handle: RePEc:gok:ijdcv1:v:3:y:2013:i:1:p:63-70
    as

    Download full text from publisher

    File URL: http://www.ijdc.org.in/uploads/1/7/5/7/17570463/july_issue_art5.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Kreps, David M. & Milgrom, Paul & Roberts, John & Wilson, Robert, 1982. "Rational cooperation in the finitely repeated prisoners' dilemma," Journal of Economic Theory, Elsevier, vol. 27(2), pages 245-252, August.
    2. Drew Fudenberg & David M. Kreps & David K. Levine, 2008. "On the Robustness of Equilibrium Refinements," World Scientific Book Chapters, in: Drew Fudenberg & David K Levine (ed.), A Long-Run Collaboration On Long-Run Games, chapter 5, pages 67-93, World Scientific Publishing Co. Pte. Ltd..
    3. Binmore, Ken, 1987. "Modeling Rational Players: Part I," Economics and Philosophy, Cambridge University Press, vol. 3(2), pages 179-214, October.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Sent, Esther-Mirjam, 2004. "The legacy of Herbert Simon in game theory," Journal of Economic Behavior & Organization, Elsevier, vol. 53(3), pages 303-317, March.
    2. Ho, Teck-Hua, 1996. "Finite automata play repeated prisoner's dilemma with information processing costs," Journal of Economic Dynamics and Control, Elsevier, vol. 20(1-3), pages 173-207.
    3. Drew Fudenberg & David K. Levine, 2008. "Reputation And Equilibrium Selection In Games With A Patient Player," World Scientific Book Chapters, in: Drew Fudenberg & David K Levine (ed.), A Long-Run Collaboration On Long-Run Games, chapter 7, pages 123-142, World Scientific Publishing Co. Pte. Ltd..
    4. Bagwell, Kyle, 1995. "Commitment and observability in games," Games and Economic Behavior, Elsevier, vol. 8(2), pages 271-280.
    5. Battigalli, Pierpaolo, 1997. "On Rationalizability in Extensive Games," Journal of Economic Theory, Elsevier, vol. 74(1), pages 40-61, May.
    6. Jean-Pierre Dupuy, 1989. "Convention et Common knowledge," Revue Économique, Programme National Persée, vol. 40(2), pages 361-400.
    7. Marek Mikolaj Kaminski, 2019. "Generalized Backward Induction: Justification for a Folk Algorithm," Games, MDPI, vol. 10(3), pages 1-25, August.
    8. D. Abreu & D. Pearce, 2000. "Bargaining, Reputation and Equilibrium Selection in Repeated Games," Princeton Economic Theory Papers 00f2, Economics Department, Princeton University.
    9. Sexton, Richard J., 1991. "Game Theory: A Review With Applications To Vertical Control In Agricultural Markets," Working Papers 225865, University of California, Davis, Department of Agricultural and Resource Economics.
    10. Stauber, Ronald, 2017. "Irrationality and ambiguity in extensive games," Games and Economic Behavior, Elsevier, vol. 102(C), pages 409-432.
    11. Gagen, Michael, 2013. "Isomorphic Strategy Spaces in Game Theory," MPRA Paper 46176, University Library of Munich, Germany.
    12. Sexton, Richard J., 1993. "Noncooperative Game Theory: A Review with Potential Applications to Agricultural Markets," Research Reports 25183, University of Connecticut, Food Marketing Policy Center.
    13. Asheim, Geir B. & Brunnschweiler, Thomas, 2023. "Epistemic foundation of the backward induction paradox," Games and Economic Behavior, Elsevier, vol. 141(C), pages 503-514.
    14. Drew Fudenberg & David K. Levine, 2008. "Maintaining a Reputation when Strategies are Imperfectly Observed," World Scientific Book Chapters, in: Drew Fudenberg & David K Levine (ed.), A Long-Run Collaboration On Long-Run Games, chapter 8, pages 143-161, World Scientific Publishing Co. Pte. Ltd..
    15. García-Pola, Bernardo & Iriberri, Nagore & Kovářík, Jaromír, 2020. "Non-equilibrium play in centipede games," Games and Economic Behavior, Elsevier, vol. 120(C), pages 391-433.
    16. Ken Binmore, "undated". "Rationality and Backward Induction," ELSE working papers 047, ESRC Centre on Economics Learning and Social Evolution.
    17. Ken Binmore, "undated". "Backward Induction and Common Knowledge," ELSE working papers 008, ESRC Centre on Economics Learning and Social Evolution.
    18. Marlats, Chantal, 2019. "Perturbed finitely repeated games," Mathematical Social Sciences, Elsevier, vol. 98(C), pages 39-46.
    19. Graciela Kuechle, 2009. "What Happened To The Three‐Legged Centipede Game?," Journal of Economic Surveys, Wiley Blackwell, vol. 23(3), pages 562-585, July.
    20. 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.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:gok:ijdcv1:v:3:y:2013:i:1:p:63-70. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: the person in charge (email available below). General contact details of provider: https://edirc.repec.org/data/gipepin.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.