An epistemic characterization of generalized backward induction

Giacomo Bonanno ()

No 60, Working Papers from University of California, Davis, Department of Economics

Abstract: We investigate the extension of backward-induction to von Neumann extensive games (where information sets have a synchronous structure) and provide an epistemic characterization of it. Extensions of the idea of backward-induction were proposed by Penta (2009) and later by Perea (2013), who also provided an epistemic characterization in terms of the notion of common belief in future rationality. The epistemic characterization we propose, although differently formulated, is conceptually the same as Perea's and so is the generalization of backward induction. The novelty of this contribution lies in the epistemic models that we use, which are dynamic, behavioral models where strategies play no role and the only beliefs that are specified are the actual beliefs of the players at the time of choice. Thus our analysis is free of (objective or subjective) counterfactuals.

Keywords: Dynamic game; imperfect information; backward induction; belief; rationality; behavioral model (search for similar items in EconPapers)
JEL-codes: C7 (search for similar items in EconPapers)
Pages: 26
Date: 2013-03-10
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