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The Game Take–or–Play: A Paradox of Rationality in Simultaneous Move Games
Author(s) -
Colombo Ferdinando
Publication year - 2003
Publication title -
bulletin of economic research
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.227
H-Index - 29
eISSN - 1467-8586
pISSN - 0307-3378
DOI - 10.1111/1467-8586.00169
Subject(s) - rationality , economics , backward induction , mathematical economics , sequential game , complete information , work (physics) , horizon , microeconomics , game theory , mathematics , epistemology , philosophy , engineering , geometry , mechanical engineering
We show that paradoxical conclusions similar to those emerging from reasonings of backward induction can arise also in simultaneous move games with incomplete information. In a static setting, these paradoxes are particularly puzzling, because the usual attempts to avoid the backward induction solution do not work. In a dynamic setting, there is a way out of the paradoxes, which hinges on a (possibly endogenous) uncertainty over the past behaviour of the players and does not call for a long time–horizon.