Equilibrium Selection in Sequential Games with Imperfect Information

Abstract

Games with imperfect information often feature multiple equilibria, which depend on beliefs o¤ 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 pro…le 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 …nd that our selection criterion outperforms the other selection criteria.

Information and targeted spending

“…In support of this sharper prediction, we note that in a laboratory experiment with and , of observed equilibrium play corresponded to the equilibrium with universal provision (Eguia et al (, Section 4.3)).…”

Communication in vertical markets: Experimental evidence

“…Note further that acceptance of the offers in the example of this passage is not supported by symmetric, passive, or wary beliefs. For discussion of possible beliefs other than these, seeEguia, Llorente-Saguer, Morton and Nicolò (2014).…”