Iterated potential and robustness of equilibria

Journal article: For any given set-valued solution concept, it is possible to consider iterative elimination of actions outside the solution set. This paper applies such a procedure to define the concept of iterated monotone potential maximizer (iterated MP-maximizer). It is shown that under some monotonicity conditions, an iterated MP-maximizer is robust to incomplete information [A. Kajii, S. Morris, The robustness of equilibria to incomplete information, Econometrica 65 (1997) 1283-1309] and absorbing and globally accessible under perfect foresight dynamics for a small friction [A. Matsui, K. Matsuyama, An approach to equilibrium selection, J. Econ. Theory 65 (1995) 415-434]. Several simple sufficient conditions under which a game has an iterated MP-maximizer are also provided.

Author(s)

Daisuke Oyama, Olivier Tercieux

Journal
  • Journal of Economic Theory
Date of publication
  • 2009
Keywords JEL
C72 C73 D82
Keywords
  • Equilibrium selection
  • Robustness
  • Incomplete information
  • Perfect foresight dynamics
  • Iteration
  • Monotone potential
  • P-Dominance
Pages
  • 1726-1769
Version
  • 1
Volume
  • 144