Trembling hand perfect equilibrium

Last updated
(Normal form) trembling hand perfect equilibrium
A solution concept in game theory
Relationship
Subset of Nash Equilibrium
Superset of Proper equilibrium
Significance
Proposed by Reinhard Selten

In game theory, trembling hand perfect equilibrium is a refinement of Nash equilibrium due to Reinhard Selten. [1] A trembling hand perfect equilibrium is an equilibrium that takes the possibility of off-the-equilibrium play into account by assuming that the players, through a "slip of the hand" or tremble, may choose unintended strategies, albeit with negligible probability.

Contents

Definition

First define a perturbed game. A perturbed game is a copy of a base game, with the restriction that only totally mixed strategies are allowed to be played. A totally mixed strategy is a mixed strategy where every pure strategy is played with non-zero probability. This is the "trembling hands" of the players; they sometimes play a different strategy, other than the one they intended to play. Then define a strategy set S (in a base game) as being trembling hand perfect if there is a sequence of perturbed games that converge to the base game in which there is a series of Nash equilibria that converge to S.

Note: All completely mixed Nash equilibria are perfect.

Note 2: The mixed strategy extension of any finite normal-form game has at least one perfect equilibrium. [2]

Example

The game represented in the following normal form matrix has two pure strategy Nash equilibria, namely and . However, only is trembling-hand perfect.

LeftRight
Up1, 12, 0
Down0, 22, 2
Trembling hand perfect equilibrium

Assume player 1 (the row player) is playing a mixed strategy , for .

Player 2's expected payoff from playing L is:

Player 2's expected payoff from playing the strategy R is:

For small values of , player 2 maximizes his expected payoff by placing a minimal weight on R and maximal weight on L. By symmetry, player 1 should place a minimal weight on D if player 2 is playing the mixed strategy . Hence is trembling-hand perfect.

However, similar analysis fails for the strategy profile .

Assume player 2 is playing a mixed strategy . Player 1's expected payoff from playing U is:

Player 1's expected payoff from playing D is:

For all positive values of , player 1 maximizes his expected payoff by placing a minimal weight on D and maximal weight on U. Hence is not trembling-hand perfect because player 2 (and, by symmetry, player 1) maximizes his expected payoff by deviating most often to L if there is a small chance of error in the behavior of player 1.

Trembling hand perfect equilibria of two-player games

For 2x2 games, the set of trembling-hand perfect equilibria coincides with the set of equilibria consisting of two undominated strategies. In the example above, we see that the equilibrium <Down,Right> is imperfect, as Left (weakly) dominates Right for Player 2 and Up (weakly) dominates Down for Player 1. [3]

Trembling hand perfect equilibria of extensive form games

Extensive-form trembling hand perfect equilibrium
A solution concept in game theory
Relationship
Subset of Subgame perfect equilibrium, Perfect Bayesian equilibrium, Sequential equilibrium
Significance
Proposed by Reinhard Selten
Used for Extensive form games

There are two possible ways of extending the definition of trembling hand perfection to extensive form games.

The notions of normal-form and extensive-form trembling hand perfect equilibria are incomparable, i.e., an equilibrium of an extensive-form game may be normal-form trembling hand perfect but not extensive-form trembling hand perfect and vice versa. As an extreme example of this, Jean-François Mertens has given an example of a two-player extensive form game where no extensive-form trembling hand perfect equilibrium is admissible, i.e., the sets of extensive-form and normal-form trembling hand perfect equilibria for this game are disjoint.[ citation needed ]

An extensive-form trembling hand perfect equilibrium is also a sequential equilibrium. A normal-form trembling hand perfect equilibrium of an extensive form game may be sequential but is not necessarily so. In fact, a normal-form trembling hand perfect equilibrium does not even have to be subgame perfect.

Problems with perfection

Myerson (1978) [4] pointed out that perfection is sensitive to the addition of a strictly dominated strategy, and instead proposed another refinement, known as proper equilibrium.

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References

  1. Selten, R. (1975). "A Reexamination of the Perfectness Concept for Equilibrium Points in Extensive Games". International Journal of Game Theory . 4 (1): 25–55. doi:10.1007/BF01766400.
  2. Selten, R.: Reexamination of the perfectness concept for equilibrium points in extensive games. Int. J. Game Theory4, 1975, 25–55.
  3. Van Damme, Eric (1987). Stability and Perfection of Nash Equilibria. doi:10.1007/978-3-642-96978-2. ISBN   978-3-642-96980-5.
  4. Myerson, Roger B. "Refinements of the Nash equilibrium concept." International journal of game theory 7.2 (1978): 73-80.

Further reading