Refinements of sequential equilibrium in a legal settlements game

by Jonathan Cave

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This paper applies several refinements of sequential equilibrium to a signaling game of legal settlement, in which the informed plaintiff has a continuum of pure strategies. The principal results are that (1) such refinements can greatly reduce the scope of equilibrium behavior; (2) there is no necessary connection between divine and perfect equilibria; and (3) perfect, divine, and proper equilibria of games with continuous pure strategy spaces may use weakly dominated strategies with positive probability.

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