Perfect equilibrium in games with compact action spaces

Economics

Speaker:Dries Vermeulen, Maastricht University
Date: Wednesday 16 January 2013
Time: 16:15
Location: Matrix Lecture Theatre, Building One

Further details

We investigate the relations between different types of perfect equilibrium, introduced by Simon and Stinchcombe (1995) for games with compact action spaces and continuous payoffs.

Simon and Stinchcombe distinguish two approaches to perfect equilibrium in this context, the classical ``trembling hand'' approach, and the so-called ``finitistic'' approach.

We propose an improved definition of the finitistic approach, called global-limit-of-finite perfection, and prove its existence.

 

Despite the fact that the finitistic approach appeals to basic intuition, our results---specifically examples (2) and (3)---seem to imply a severe critique on this approach.

In the first example any version of finitistic perfect equilibrium admits a Nash equilibrium strategy profile that is not limit admissible.

The second example gives a completely mixed (and hence trembling hand perfect) Nash equilibrium that is not finitistically perfect.

 

Further examples illustrate the relations between the two approaches to perfect equilibrium and the relation to admissibility and undominatedness of strategies.