Backward Induction and Model Deterioration
The issue of how players' model of a game may evolves over time is largely unexplored. We formalize this issue for games with perfect information, and show that small-probability model deterioration may upset the complete-model backward induction solution, possibly yielding a Pareto-improving long run distribution of play. We derive necessary and sufficient conditions for the robustness of backward induction. These conditions can be interpreted with a forward-induction logic, and are shown to be closely related to the requirements for asymptotic stability of the backward induction path under standard evolutionary dynamics.
Year of publication: |
2004
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Authors: | Francesco, Squintani |
Published in: |
The B.E. Journal of Theoretical Economics. - De Gruyter, ISSN 1935-1704. - Vol. 4.2004, 1, p. 1-36
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Publisher: |
De Gruyter |
Saved in:
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