Tenable threats when Nash equilibrium is the norm

Françoise Forges () and József Sákovics
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Françoise Forges: Université Paris-Dauphine, PSL University, LEDa

International Journal of Game Theory, 2022, vol. 51, issue 3, No 6, 589-605

Abstract: Abstract We formally assume that players in a game consider Nash Equilibrium (NE) the behavioral norm. In finite games of perfect information this leads to a refinement of NE: Faithful Nash Equilibrium (FNE). FNE is outcome equivalent to NE of the “trimmed” game, obtained by restricting the original tree to its NE paths. Thus, it always exists but it need not be unique. Iterating the norm ensures uniqueness of outcome. FNE may violate backward induction when subgame perfection requires play according to the SPE following a deviation from it. We thus provide an alternative view of tenable threats in equilibrium analysis.

Keywords: Backward induction; Credible threat; Equilibrium refinement; Games of perfect information; Sequential rationality (search for similar items in EconPapers)
JEL-codes: C72 C73 D01 D83 D91 (search for similar items in EconPapers)
Date: 2022
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Working Paper: Tenable threats when Nash equilibrium is the norm (2022)
Working Paper: Tenable Threats when Nash Equilibrium is the Norm (2021)
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DOI: 10.1007/s00182-022-00806-3

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