I have asked this question in Mathematics StackExchange, but there is no response yet. I've just realized that here is the right forum for asking research level questions... :'(

In game theory, in the attempt to define sequential equilibrium, for every tuple $b$ of behavioral strategies for each player, the corresponding belief system induced by $b$ is defined. A tuple $(b,μ)$ is called an assessment if $μ$ is the belief system induced by $b$.

Then, the criterion of an assessment being sequentially rational is defined.

Finally, sequential equilibrium is defined as an assessment $(b,μ)$ such that:

  1. $(b,μ)$ is sequentially rational.
  2. There exists a sequence of assessments $(b_i,μ_i)$ such that each $b_i$ assigns nonzero probabilities to all decisions and the sequence converges to $(b,μ)$.

My question is: can there be a sequence of assessments $(b_i,μ_i)$ satisfying condition number 2 and converging to a sequential equilibrium but with each element being not sequentially rational?

Just in case the answer is YES, what if it is given that: each sequence of assessments satisfying condition number 2 -- and converging to an assessment $(b,μ)$ -- has $(b_i,μ_i)$ being not sequentially rational for all large enough $i$? Can then it be concluded that $(b,μ)$ is not sequentially rational?

I have a strong intuition that the answer to the second question must be YES, because if it isn't, then the definition of sequential equilibrium seems pointless.

  • $\begingroup$ I'm a bit fuzzy on this, but I think each $(b_i,\mu_i)$ can be let us say $\epsilon_i$-sequentially rational, with $\epsilon_i \to 0$, but none of them exactly sequentially rational. By this I mean that some player has a deviation that improves expected utility by up to $\epsilon_i$. $\endgroup$ – usul May 28 '18 at 8:43
  • $\begingroup$ A counterexample has been given here: math.stackexchange.com/questions/2797641/… $\endgroup$ – Mauri Ericson Sombowadile May 29 '18 at 16:23

Consider a situation in which some player has a strictly dominated strategy. Any strategy profile that assigns a strictly positive probability to all actions at all information sets will involve a player not playing something sequentially rational given any beliefs.

If we would not allow this, even the prisoner's dilemma would have no sequential equilibrium.


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