Tenable threats when Nash equilibrium is the norm

József Sákovics and Françoise Forges ()
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Françoise Forges: CEREMADE - CEntre de REcherches en MAthématiques de la DEcision - Université Paris Dauphine-PSL - PSL - Université Paris Sciences et Lettres - CNRS - Centre National de la Recherche Scientifique, 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) thebehavioral norm. In önite games of perfect information this leads to a reönementof NE: Faithful Nash Equilibrium (FNE). FNE is outcome equivalent to NE of theìtrimmedî 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 uniquenessof outcome. FNE may violate backward induction when subgame perfection requires play according to the SPE following a deviation from it. We thus provide analternative view of tenable threats in equilibrium analysis.

Keywords: Nash Equilibrium; threat (search for similar items in EconPapers)
Date: 2022-01-20
New Economics Papers: this item is included in nep-gth
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Journal Article: Tenable threats when Nash equilibrium is the norm (2022)
Working Paper: Tenable Threats when Nash Equilibrium is the Norm (2021)
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