On forward induction in money-burning games

Makoto Shimoji

Economic Theory, 2002, vol. 19, issue 3, 637-648

Abstract: We first consider money-burning games studied by Ben-Porath and Dekel [6]. We show that iterative weak dominance and extensive form rationalizability yield the same unique outcome in this class of games. This result suggests that weak dominance captures the forward induction logic implied by extenisve form rationalizability. Next, we consider an example of entry model by Arvan [1] to demonstrate the power of forward induction. In this example, despite the presence of multiple equilibria, forward induction chooses a unique outcome.

Keywords: Conditional dominance; Rationalizability; Weak dominance; Forward induction; Money-burning games. (search for similar items in EconPapers)
Date: 2001-12-20
Note: Received: January 25, 2000; revised version: January 5, 2001
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Citations: View citations in EconPapers (3)

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