Limits of equilibrium predictions
An equilibrium is a consistency condition on strategies and beliefs under a specified model. It does not guarantee that people will discover or play it.
Definition
An equilibrium is a consistency condition on strategies and beliefs under a specified model. It does not guarantee that people will discover or play it.
Intuition
Preferences, information, timing, and feasible actions must be modeled before an equilibrium prediction has meaning.
Worked example
Two coordination equilibria can both be stable against unilateral deviation, while the model alone does not select which one players reach.
The math
Existence, uniqueness, efficiency, and convergence are separate properties. Proving one does not establish the others.
Where it is used
Compare predicted behavior with evidence, and state assumptions when applying a classroom game to real institutions.
Sources
More in Game theory
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