chapter  6
Solving a game differently
Pages 49

This chapter focuses on trembles and their consequences, and the core concept developed is Selten's trembling-hand equilibrium. Selten doesn't shake the whole game: he only perturbs strategies. His idea is that the chapter push on a button to validate the strategy, and that with a small probability because of distraction or temporary insanity, or a trembling hand, it pushes on a wrong button. The chapter talks about Selten's closest related concepts, Kreps and Wilson's sequential equilibrium and Harsanyi's perfect Bayesian equilibrium. It proposes four nice examples that show in a progressive way when very small changes have no impact and when, by contrast, they can destroy upper hemicontinuity and lower hemicontinuity of equilibrium sets. The chapter works with a carrier pigeon, and studies successively an ascending all pay auction with unknown budgets, negotiation games with an unknown number of negotiation rounds, and Rubinstein's electronic mail game. It perturbs payoffs with Jackson et al. and the concept of quantal response.