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Open AccessArticle

Generalized Backward Induction: Justification for a Folk Algorithm

Department of Political Science and Mathematical Behavioral Sciences, University of California, 3151 Social Science Plaza, Irvine, CA 92697-5100, USA
Games 2019, 10(3), 34; https://doi.org/10.3390/g10030034
Received: 11 June 2019 / Revised: 12 August 2019 / Accepted: 27 August 2019 / Published: 30 August 2019
(This article belongs to the Special Issue Political Economy, Social Choice and Game Theory)

I introduce axiomatically infinite sequential games that extend Kuhn’s classical framework. Infinite games allow for (a) imperfect information, (b) an infinite horizon, and (c) infinite action sets. A generalized backward induction (GBI) procedure is defined for all such games over the roots of subgames. A strategy profile that survives backward pruning is called a backward induction solution (BIS). The main result of this paper finds that, similar to finite games of perfect information, the sets of BIS and subgame perfect equilibria (SPE) coincide for both pure strategies and for behavioral strategies that satisfy the conditions of finite support and finite crossing. Additionally, I discuss five examples of well-known games and political economy models that can be solved with GBI but not classic backward induction (BI). The contributions of this paper include (a) the axiomatization of a class of infinite games, (b) the extension of backward induction to infinite games, and (c) the proof that BIS and SPEs are identical for infinite games. View Full-Text
Keywords: subgame perfect equilibrium; backward induction; refinement; axiomatic game theory; agenda setter; imperfect information; political economy subgame perfect equilibrium; backward induction; refinement; axiomatic game theory; agenda setter; imperfect information; political economy
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Kaminski, M.M. Generalized Backward Induction: Justification for a Folk Algorithm. Games 2019, 10, 34.

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