Are Equilibrium Strategies Unaffected by Incentives
Bibliographic Data
| ID | 6299380 |
|---|---|
| Authors | Jack Hirshleifer, Eric Rasmusen |
| Year | 1992 |
| Volume | 4 |
| Issue | 3 |
| Pages | 353-367 |
| Publication date | 1992-07-01 |
| Open Access | Yes |
| Type | ARTICLE |
| Venue | Journal of Theoretical Politics (JOURNAL) |
| Journal identifiers | ISSN: 0951-6298 • E-ISSN: 1460-3667 |
| Publisher | SAGE Publications Inc (PUBLISHER) |
| DOI | 10.1177/0951692892004003007 |
| OpenAlex | W2083359849 |
| Language | EN |
| Citations received | 7 |
| References cited | 7 |
In a mixed-strategy Nash equilibrium, changing one player's payoffs affects only the other player's equilibrium strategy mix. This `Payoff Irrelevance Proposition' (PIP) appears to undercut the main foundations of economic policy analysis since, allegedly, equilibrium behavior will not respond to changes in incentives. We show, in contrast, that: (1) When the policy-maker has the first move in a sequential-move game, the PIP does not hold. (2) Even in a simultaneous-move game, the PIP holds only when the policy space is discrete, and for sufficiently small payoff revisions. Thus, incentives do generally affect behavior in equilibrium
Economics · Equilibrium selection · Game theory · Incentive · Mathematical economics · Microeconomics · Nash equilibrium · Repeated game · Stochastic game · Symmetric equilibrium · Economic Policies and Impacts · Economic theories and models · Experimental Behavioral Economics Studies
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| Citations per year | 0.22 |
|---|---|
| Citation span | 1994 - 2011 (18) |
| Highly cited | No |