Rationality of Final Decisions Leads to Sequential Equilibrium

Ryuichiro Ishikawa () and Takashi Matsuhisa ()
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Ryuichiro Ishikawa: Hitotsubashi University, Graduate School of Economics
Takashi Matsuhisa: Ibaraki National College of Technology, Department of Liberal Arts and Sciences

A chapter in ICM Millennium Lectures on Games, 2003, pp 193-204 from Springer

Abstract: Summary This article investigateS epistemic conditions for a sequential equilibrium in an extensive form game with imperfect information: If players mutually know that all players maximize own expected payoffs for any information sets in their final decisions, then their behaviors with belief yield a sequential equilibrium. This result is an extension of [2] in a perfect information game In this article, we propose the notion of μ-rationality, by which we mean that player knows that he maximizes his own payoff according to the common-belief μ. We also introduce the notion of μ-consistency in imperfect information game. Our main theorem states that mutual knowledge of both μ-rationality and μ-consistency induces a sequential equilibrium outcome in an extensive form game.

Keywords: Knowledge; Rationality; epistemic conditions; backward induction; sequential equilibrium (search for similar items in EconPapers)
Date: 2003
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Persistent link: https://EconPapers.repec.org/RePEc:spr:sprchp:978-3-662-05219-8_12

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DOI: 10.1007/978-3-662-05219-8_12

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