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Asymptotic Behavior of Subgame Perfect Nash Equilibria in Stackelberg Games

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The study on how equilibria behave when perturbations occur in the data of a game is a fundamental theme, since actions and payoffs of the players may be affected by uncertainty or trembles. In this paper we investigate the asymptotic behavior of the subgame perfect Nash equilibrium (SPNE) in one-leader one-follower Stackelberg games under perturbations both of the action sets and of the payoff functions. To pursue this aim, we consider a general sequence of perturbed Stackelberg games and a set of assumptions that fit the usual types of perturbations. We study if the limit of SPNEs of the perturbed games is an SPNE of the original game and if the limit of SPNE outcomes of perturbed games is an SPNE outcome of the original game. We fully positively answer when the follower’s best reply correspondence is single valued. When the follower’s best reply correspondence is not single valued, the answer is positive only for the SPNEs outcomes; whereas the answer for SPNEs may be negative, even if the perturbation does not affect the sets and affects only one payoff function. However, we show that under suitable non-restrictive assumptions it is possible to obtain an SPNE starting from the limit of SPNEs of perturbed games, possibly modifying the limit at just one point.

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  • Francesco Caruso & Maria Carmela Ceparano & Jacqueline Morgan, 2022. "Asymptotic Behavior of Subgame Perfect Nash Equilibria in Stackelberg Games," CSEF Working Papers 661, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy.
    • Handle: RePEc:sef:csefwp:661
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