Tenable threats when Nash equilibrium is the norm

Françoise Forges () and József Sákovics
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Françoise Forges: LEDa - Laboratoire d'Economie de Dauphine - IRD - Institut de Recherche pour le Développement - Université Paris Dauphine-PSL - PSL - Université Paris Sciences et Lettres - CNRS - Centre National de la Recherche Scientifique

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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: Sequential rationality; Games of perfect information; Equilibrium refnement; Credible threat; Backward induction (search for similar items in EconPapers)
Date: 2022-09-14
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Published in International Journal of Game Theory, 2022, 51 (3-4), pp.589-605. ⟨10.1007/s00182-022-00806-3⟩

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Related works:
Journal Article: Tenable threats when Nash equilibrium is the norm (2022)
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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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-05492828

DOI: 10.1007/s00182-022-00806-3

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