Dynamic Consistency and Imperfect Recall

Author: Battigalli P.

Source: Games and Economic Behavior, Volume 20, Number 1, July 1997 , pp. 31-50(20)

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Abstract:

We argue that a notion of constrained time consistency is appropriate to evaluate the interim incentives to deviate from a plan in a decision problem with imperfect recall. Under perfect recall, constrained time consistency is equivalent to the standard notion of time consistency. It turns out that a behavioral strategy beta is constrained time consistent if and only if every realization equivalent strategy beta\' is a modified multiselves equilibrium and this implies that every optimal strategy is constrained time consistent. Furthermore, every constrained time consistent strategy is equivalent to a modified multiselves sequential equilibrium. Journal of Economic Literature Classification Numbers: C72, D81.

Language: English

Document Type: Research article

Affiliations: Department of Economics, Princeton University, Princeton, New Jersey, 08544-1021

Publication date: 1997-07-01