We provide an epistemic analysis of forward induction in games with complete and incomplete information. We suggest that forward induction may be usefully interpreted as a set of assumptions governing the players' belief revision processes, and define a notion of strong belief to formalize these assumptions. Building on the notion of strong belief, we provide an epistemic characterization of extensive-form rationalizability and the intuitive criterion, as well as sufficient epistemic conditions for the backward induction outcome. We also investigate the robustness of rationalizability to slight payoff uncertainity.
Strong belief and forward induction reasoning
BATTIGALLI, PIERPAOLO;
2002
Abstract
We provide an epistemic analysis of forward induction in games with complete and incomplete information. We suggest that forward induction may be usefully interpreted as a set of assumptions governing the players' belief revision processes, and define a notion of strong belief to formalize these assumptions. Building on the notion of strong belief, we provide an epistemic characterization of extensive-form rationalizability and the intuitive criterion, as well as sufficient epistemic conditions for the backward induction outcome. We also investigate the robustness of rationalizability to slight payoff uncertainity.
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