Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/97332
Authors: 
Eguia, Jon X.
Llorente-Saguer, Aniol
Morton, Rebecca
Nicolò, Antonio
Year of Publication: 
2014
Series/Report no.: 
Working Paper, School of Economics and Finance, Queen Mary, University of London 717
Abstract: 
Games with imperfect information often feature multiple equilibria, which depend on beliefs off 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 profile 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 find that our selection criterion outperforms the other selection criteria.
Subjects: 
Equilibrium selection
Passive beliefs
Symmetric beliefs
Vertical contracting
Multiple equilibria
Imperfect information
JEL: 
C72
D86
H41
D72
Document Type: 
Working Paper

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