Tenable Strategy Blocks and Settled Equilibria
2015 (English)In: Econometrica, ISSN 0012-9682, E-ISSN 1468-0262, Vol. 83, no 3, 943-976 p.Article in journal (Refereed) Published
When people interact in familiar settings, social conventions usually develop so that people tend to disregard alternatives outside the convention. For rational players to usually restrict attention to a block of conventional strategies, no player should prefer to deviate from the block when others are likely to act conventionally and rationally inside the block. We explore two set-valued concepts, coarsely and finely tenable blocks, that formalize this notion for finite normal-form games. We then identify settled equilibria, which are Nash equilibria with support in minimal tenable blocks. For a generic class of normal-form games, our coarse and fine concepts are equivalent, and yet they differ from standard solution concepts on open sets of games. We demonstrate the nature and power of the solutions by way of examples. Settled equilibria are closely related to persistent equilibria but are strictly more selective on an open set of games. With fine tenability, we obtain invariance under the insertion of a subgame with a unique totally mixed payoff-equivalent equilibrium, a property that other related concepts have not satisfied.
Place, publisher, year, edition, pages
2015. Vol. 83, no 3, 943-976 p.
Settled equilibrium, tenable block, consideration set, convention, norm
Economics and Business Mathematics
IdentifiersURN: urn:nbn:se:kth:diva-169972DOI: 10.3982/ECTA11048ISI: 000355990500005ScopusID: 2-s2.0-84930751873OAI: oai:DiVA.org:kth-169972DiVA: diva2:826482
QC 201506252015-06-252015-06-252015-06-25Bibliographically approved