On the Impossibility of Stability-Based Equilibria in Infinite Horizon: An Example

• Authors: Malachy James Gavan and Alexander Frug.
• BSE Working Paper: 1536 | December 25
• Keywords: dynamic learning and communication , revision-proof equilibria
• JEL codes: D83

This paper shows that stability-based equilibrium refinements may not be well defined when taken to the infinite horizon. To do so, we use a stable-set-style notion of the dynamically consistent partition, allowing for incomplete information. We provide a concrete example where, only via taking the game to the infinite horizon, the dynamically consistent partition of equilibria does not exist.