• Graduate Programs
  • Research
  • Browse our Courses
  • Events
    • Events Calendar
    • Events Archive
    • Summer School
      • Applied Public Policy Evaluation
      • Deep Learning
      • Development Economics
      • Economics of Blockchain and Digital Currencies
      • Economics of Climate Change
      • The Economics of Crime
      • Foundations of Machine Learning with Applications in Python
      • From Preference to Choice: The Economic Theory of Decision-Making
      • Inequalities in Health and Healthcare
      • Marketing Research with Purpose
      • Markets with Frictions
      • Modern Toolbox for Spatial and Functional Data
      • Sustainable Finance
      • Tuition Fees and Payment
      • Business Data Science Summer School Program
    • Tinbergen Institute Lectures
    • 2026 Tinbergen Institute Opening Conference
    • Annual Tinbergen Institute Conference
  • News
  • Summer School
    • Applied Public Policy Evaluation
    • Deep Learning
    • Development Economics
    • Economics of Blockchain and Digital Currencies
    • Economics of Climate Change
    • The Economics of Crime
    • Foundations of Machine Learning with Applications in Python
    • From Preference to Choice: The Economic Theory of Decision-Making
    • Inequalities in Health and Healthcare
    • Marketing Research with Purpose
    • Markets with Frictions
    • Modern Toolbox for Spatial and Functional Data
    • Sustainable Finance
    • Tuition Fees and Payment
  • Alumni

Houba, H. and Wen, Q. (2014). Backward induction and unacceptable offers Journal of Mathematical Economics, 54(October):151--156.

  • Journal
    Journal of Mathematical Economics
View publication

How to establish the existence of subgame perfect equilibrium (SPE) in bargaining models if no stationary SPEs (SSPEs) exist? The backward-induction technique of Shaked and Sutton (1984, Econometrica) applies to the cyclical structure of SPE payoffs and provides recursive dynamics on the bounds of SPE payoffs. Acceptable and unacceptable offers have to be incorporated for these dynamics to be necessary and sufficient for extreme SPEs. In this paper, we demonstrate how these recursive dynamics are directly applicable to establish the existence of SPE in a model with no SSPE. Also from these dynamics, the extreme SPE strategy profiles can easily be recovered.