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The Subgame Perfect Core

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Working paper
Author/s: 
Parkash Chander and Myrna Wooders
Issue number: 
VUECON-16-00006
Series: 
Vanderbilt University Department of Economics Working Papers
Publisher: 
Vanderbilt University
Year: 
2016
We propose a cooperative solution concept for games in extensive form that incorporates both cooperation and subgame perfection. This new concept, which we label the subgame-perfect core, is a refinement of the core of an extensive game in the same sense as the set of subgame-perfect Nash equilibria is a refinement of the set of Nash equilibria. Moreover, each subgame perfect core payoff vector can be obtained as a subgame-perfect Nash equilibrium payoff vector of a modified extensive game. We establish several additional properties of the subgame-perfect core and demonstrate its applicability by studying three applications: the centipede game, the two-player infinite bargaining game of alternating offers, and a dynamic game of climate change. In addition, we motivate and introduce a concept of subgame-perfect strong Nash equilibrium of an extensive game and show that it is coalition proof.
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