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

Ferdinando Colombo

Bulletin of Economic Research, 2003, vol. 55, issue 2, 195-202

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.

Date: 2003
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