 Epistemic foundation of the backward induction paradoxGeir Asheim and Thomas Brunnschweiler Games and Economic Behavior, 2023, vol. 141, issue C, 503-514 Abstract: After having observed a deviation from backward induction, a player might deem the opponent prone to deviate from backward induction again, making it worthwhile to deviate themself. Such reaction might make the deviation by the opponent worthwhile in the first place—which is the backward induction paradox. This argument against backward induction cannot be made in games where all players choose only once on each path. While strategic-form perfect equilibrium yields backward induction in games where players choose only once on each path but not necessarily otherwise, no existing non-equilibrium concept captures the backward induction paradox by having these properties. To provide such a concept, we define and epistemically characterize the concept of independently permissible strategies. Since beliefs are modeled by non-Archimedean probabilities, meaning that some opponent choices might be assigned subjective probability zero without being deemed subjectively impossible, special attention is paid to the formalization of stochastically independent beliefs. Keywords: Perfect information games; Backward induction paradox; Non-Archimedean probabilities; Stochastic independence (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:gamebe:v:141:y:2023:i:c:p:503-514 DOI: 10.1016/j.geb.2023.07.007 Access Statistics for this article Games and Economic Behavior is currently edited by E. Kalai More articles in Games and Economic Behavior from Elsevier |
Is your work missing from RePEc? Here is how to contribute.
Questions or problems? Check the EconPapers FAQ or send mail to .
EconPapers is hosted by the
School of Business at Örebro University.