EconPapers    
Economics at your fingertips  
 

Forward induction reasoning and correct beliefs

Andrés Perea

Journal of Economic Theory, 2017, vol. 169, issue C, 489-516

Abstract: All equilibrium concepts implicitly make a correct beliefs assumption, stating that a player believes that his opponents are correct about his first-order beliefs. In this paper we show that in many dynamic games of interest, this correct beliefs assumption may be incompatible with a very basic form of forward induction reasoning: the first two layers of extensive-form rationalizability (Pearce, 1984; Battigalli, 1997, epistemically characterized by Battigalli and Siniscalchi, 2002). Hence, forward induction reasoning naturally leads us away from equilibrium reasoning. In the second part we classify the games for which equilibrium reasoning is consistent with this type of forward induction reasoning, and find that this class is very small.

Keywords: Epistemic game theory; Dynamic games; Forward induction; Common strong belief in rationality; Correct beliefs assumption; Equilibrium (search for similar items in EconPapers)
JEL-codes: C72 (search for similar items in EconPapers)
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1) Track citations by RSS feed

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0022053117300303
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:jetheo:v:169:y:2017:i:c:p:489-516

Access Statistics for this article

Journal of Economic Theory is currently edited by A. Lizzeri and K. Shell

More articles in Journal of Economic Theory from Elsevier
Bibliographic data for series maintained by Dana Niculescu ().

 
Page updated 2019-05-11
Handle: RePEc:eee:jetheo:v:169:y:2017:i:c:p:489-516