In this paper we isolate a particular refinement of the notion of Nash equilibrium that is characterized by (i) the fact that it provides a unified framework for both backwards and forward induction; and (ii) by the fact that it is mechanically computable. We provide an effective procedure, whose definition embodies certain given principles of rationality. Such a procedure allows us, given a re...

We examine a sequential mechanism which is a simple modification of the normal form mechanism introduced by Abreu and Matsushima (1992). We show that almost any social choice function can be virtually implemented via a finite sequential game of perfect information. The solution concept assumed is backwards induction. In particular, any social choice function that is virtually implementable via ...

In this paper we want to shed some further light on what we mean by backwards induction and forward induction reasoning in dynamic games. To that purpose, we take the concepts of common belief in future rationality (Perea (2010)) and extensive form rationalizability (Pearce (1984), Battigalli (1997), Battigalli and Siniscalchi (2002)) as possible representatives for backwards induction and forw...

In economics duopoly is a market dominated by two firms large enough to influence the market price. Stackelberg presented a dynamic form of duopoly that is also called ‘leader-follower’ model. We give a quantum perspective on Stackelberg duopoly that gives a backwards-induction outcome same as the Nash equilibrium in static form of duopoly also known as Cournot’s duopoly. We find two qubit quan...

We extend the result from Bossert and Sprumont (2013) that every single-valued choice function is backwards-induction rationalizable via strict preferences to the case of choice correspondences via weak preferences. JEL Classification Numbers: C72; D70

In finite games subgame perfect equilibria are precisely those that are obtained by a backwards induction procedure. In large extensive form games with perfect information this equivalence does not hold: Strategy combinations fulfilling the backwards induction criterion may not be subgame perfect in general. The full equivalence is restored only under additional (topological) assumptions. This ...

Imagine the following game, which is commonly called a ‘centipede game’. There is a pile of pound coins on the table. X and Y take it in turns to take either one or two coins from the pile, and they keep the coins they take. However, as soon as either of them takes two coins, the game stops, and the rest of the coins are cleared away. So long as they each take only one coin when their turn come...

The evolutionary basis for predicting the backwards induction solution in generic ̄nite extensive-form games with perfect information is examined. Evolution is modelled using the replicator dynamic in combination with rare mutations that introduce a small change in the proportion of each strategy. The criterion for our judgement is whether this dynamic stabilizes over time at the subgame perfec...