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On forward induction in money-burning games

Shimoji, M. (2002) On forward induction in money-burning games. Economic Theory, 19 (3). pp. 637-648. ISSN 0938-2259

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We first consider money-burning games studied by Ben-Porath and Dekel [6]. We show that iterative weak dominance and extensive form rationalizability yield the same unique outcome in this class of games. This result suggests that weak dominance captures the forward induction logic implied by extenisve form rationalizability. Next, we consider an example of entry model by Arvan [1] to demonstrate the power of forward induction. In this example, despite the presence of multiple equilibria, forward induction chooses a unique outcome.

Item Type: Article
Institution: The University of York
Academic Units: The University of York > Economics and Related Studies (York)
Depositing User: York RAE Import
Date Deposited: 05 Jun 2009 11:26
Last Modified: 05 Jun 2009 11:26
Published Version: http://dx.doi.org/10.1007/s001990100169
Status: Published
Publisher: Springer Science + Business Media
Identification Number: 10.1007/s001990100169
URI: http://eprints.whiterose.ac.uk/id/eprint/6001

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