Equilibrium Selection in Sequential Games with Imperfect Information

60 Pages Posted: 26 Mar 2014

See all articles by Jon X. Eguia

Jon X. Eguia

Michigan State University - Department of Economics

Aniol Llorente-Saguer

Queen Mary University of London

Rebecca Morton

New York University (NYU) - Wilf Family Department of Politics

Antonio Nicolò

University of Padua - Department of Economics; University of Manchester

Multiple version iconThere are 2 versions of this paper

Date Written: March 2014

Abstract

Games with imperfect information often feature multiple equilibria, which depend on beliefs off the equilibrium path. Standard selection criteria such as passive beliefs, symmetric beliefs or wary beliefs rest on ad hoc restrictions on beliefs. We propose a new selection criterion that imposes no restrictions on beliefs: we select the action profile that is supported in equilibrium by the largest set of beliefs. We conduct experiments to test the predictive power of the existing and our novel selection criteria in two applications: a game of vertical multi-lateral contracting, and a game of electoral competition. We find that our selection criterion outperforms the other selection criteria.

Keywords: imperfect information, equilibrium selection, passive beliefs, symmetric beliefs, vertical contracting, multiple equilibria

JEL Classification: H41, C72, D86, D72

Suggested Citation

Eguia, Jon X. and Llorente-Saguer, Aniol and Morton, Rebecca and Nicolò, Antonio, Equilibrium Selection in Sequential Games with Imperfect Information (March 2014). MPI Collective Goods Preprint, No. 2014/4, Available at SSRN: https://ssrn.com/abstract=2414500 or http://dx.doi.org/10.2139/ssrn.2414500

Jon X. Eguia (Contact Author)

Michigan State University - Department of Economics ( email )

East Lansing, MI 48824
United States

Aniol Llorente-Saguer

Queen Mary University of London ( email )

Lincoln's Inn Fields
Mile End Rd.
London, E1 4NS
United Kingdom

HOME PAGE: http://https://sites.google.com/site/aniollls/

Rebecca Morton

New York University (NYU) - Wilf Family Department of Politics ( email )

715 Broadway
New York, NY 10003
United States
212-998-3706 (Phone)

Antonio Nicolò

University of Padua - Department of Economics ( email )

via Del Santo 33
Padova, 35123
Italy

University of Manchester ( email )

Arthur Lewis Building
Oxford Road
Manchester, M13 9PL
United Kingdom

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