Zibo Xu: Dept. of Economic Statistics, Stockholm School of Economics, Postal: Stockholm School of Economics, P.O. Box 6501, SE-113 83 Stockholm, Sweden
Abstract: We prove that, in all finite generic extensive-form games of perfect information, a continuous-time best response dynamic always converges to a Nash equilibrium component. We show the robustness of convergence by an approximate best response dynamic: whatever the initial state and an allowed approximate best response dynamic, the state is close to the set of Nash equilibria most of the time. In a perfect-information game where each player can only move at one node, we prove that all interior approximate best response dynamics converge to the backward induction equilibrium, which is hence the socially stable strategy in the game.
44 pages, First version: June 24, 2013. Revised: June 28, 2013.
Note: The author would like to acknowledge financial support from the Knut and Alice Wallenberg Foundation.
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