Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/278678 
Year of Publication: 
2023
Series/Report no.: 
ECONtribute Discussion Paper No. 254
Publisher: 
University of Bonn and University of Cologne, Reinhard Selten Institute (RSI), Bonn and Cologne
Abstract: 
This paper introduces and analyzes sequentially stable outcomes in extensive games. An outcome ω is sequentially stable if for any ε >0, any version of the game where players make mistakes with small enough probability has a perfect ε-equilibrium with outcome close to ω. Unlike stable outcomes (Kohlberg and Mertens, 1986), sequentially stable outcomes exist for all finite games and are sequentially rational. If there is a unique sequentially stable outcome, such an outcome is the unique stable outcome of the game's agent normal form. Also, sequentially sta-ble outcomes 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 stable outcomes.
Subjects: 
Sequential stability
stable outcome
signaling games
JEL: 
C72
C73
Document Type: 
Working Paper

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