A BEJTE Advances article.

Abstract

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.

Submitted: May 3, 2004 · Accepted: November 2, 2004 · Published: December 17, 2004

Originally published in Advances in Theoretical Economics.

Recommended Citation

Squintani, Francesco (2004) "Backward Induction and Model Deterioration," Advances in Theoretical Economics: Vol. 4 : Iss. 1, Article 2.
Available at: http://www.bepress.com/bejte/advances/vol4/iss1/art2