Beyond Normal Form Invariance: First Mover Advantage in Two-Stage Games with or without Predictable Cheap Talk

Peter Hammond

The Warwick Economics Research Paper Series (TWERPS) from University of Warwick, Department of Economics

Abstract: Von Neumann (1928) not only introduced a fairly general version of the extensive form game concept. He also hypothesized that only the normal form was relevant to rational play. Yet even in Battle of the Sexes, this hypothesis seems contradicted by players' actual behaviour in experiments. Here a refined Nash equilibrium is proposed for games where one player moves first, and the only other player moves second without knowing the first move. The refinement relies on a tacit understanding of the only credible and straightforward perfect Bayesian equilibrium in a corresponding game allowing a predictable direct form of cheap talk.

Pages: 24 pages
Date: 2008
New Economics Papers: this item is included in nep-exp and nep-gth
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Chapter: Beyond Normal Form Invariance: First Mover Advantage in Two-Stage Games with or without Predictable Cheap Talk (2008)
Working Paper: Beyond Normal Form Invariance: First Mover Advantage in Two-Stage Games with or without Predictable Cheap Talk (2008)
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Persistent link: https://EconPapers.repec.org/RePEc:wrk:warwec:835

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