The foundation of stability in extensive games with perfect information

Xiao Luo

Journal of Mathematical Economics, 2009, vol. 45, issue 12, 860-868

Abstract: This paper studies the decision-theoretic foundation for the notion of stability in the dynamic context of strategic interaction. We formulate and show that common knowledge of rationality implies a "stable" pattern of behavior in extensive games with perfect information. In the "generic" case, our approach is consistent with Aumann's [Aumann, R.J., 1995. Backward induction and common knowledge of rationality. Games and Economic Behavior 8, 6-19] result that common knowledge of rationality leads to the backward induction outcome.

Keywords: Extensive; games; Stable; sets; Rationality; Common; knowledge (search for similar items in EconPapers)
Date: 2009
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Persistent link: https://EconPapers.repec.org/RePEc:eee:mateco:v:45:y:2009:i:12:p:860-868

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