A Characterization of Sequential Equilibrium through $\varepsilon$-Perfect $\gamma$-Sequential Equilibrium with Local Sequential Rationality and Its Computation
Abstract
Sequential equilibrium requires a consistent assessment and sequential rationality, where the consistent assessment emerges from a convergent sequence of totally mixed behavioral strategies and associated beliefs. However, the original definition lacks explicit guidance on constructing such convergent sequences. To overcome this difficulty, this paper presents a characterization of sequential equilibrium by introducing -perfect -sequential equilibrium with local sequential rationality. For any , we establish a perfect -sequential equilibrium as a limit point of a sequence of -perfect -sequential equilibrium with . A sequential equilibrium is then derived from a limit point of a sequence of perfect -sequential equilibrium with . This characterization systematizes the construction of convergent sequences and enables the analytical determination of sequential equilibria and the development of a polynomial system serving as a necessary and sufficient condition for -perfect -sequential equilibrium. Exploiting the characterization, we develop a differentiable path-following method to compute a sequential equilibrium.
Cite
@article{arxiv.2503.19493,
title = {A Characterization of Sequential Equilibrium through $\varepsilon$-Perfect $\gamma$-Sequential Equilibrium with Local Sequential Rationality and Its Computation},
author = {Yiyin Cao and Chuangyin Dang},
journal= {arXiv preprint arXiv:2503.19493},
year = {2025}
}