Sequentially Stable Outcomes
Econometrica · 2024 · Volume 92 · Issue 4
Abstract
This paper introduces and analyzessequentially stable outcomesin extensive-form games. An outcomeωis sequentially stable if, for anyε> 0 and any small enough perturbation of the players' behavior, there is anε-perturbation of the players' payoffs and a corresponding equilibrium with outcome close toω. Sequentially stable outcomes exist for all finite games and are outcomes of sequential equilibria. They are closely related to stable sets of equilibria and satisfy versions of forward induction, iterated strict equilibrium dominance, and invariance to simultaneous moves. In signaling games, sequentially stable outcomes pass the standard selection criteria, and when payoffs are generic, they coincide with outcomes of stable sets of equilibria.
Keywords
Sequential stability, stable outcome, signaling games
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