Rationality, equilibrium notion, cooperation, and bargaining
Perfect sequential equilibrium

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Abstract

Our equilibrium concept is a restriction of sequential equilibrium. A player chooses a “metastrategy” which specifies his act as a function of his belief. This permits players to evaluate how a game will evolve if new beliefs are assigned to a given node, and enables us to develop a restriction on the beliefs “off the equilibrium path.” A perfect sequential equilibrium is supported by beliefs p which prevent a player from deviating to an unreached node, when there is no belief q which, when assigned to the node, makes it optimal for a deviation to occur with probability q.

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Research supported by the National Science Foundation. We are grateful to David Kreps for many helpful comments and ideas.

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