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Graduate School

Master of Science in Economics and Social Sciences

Equivalent Extensive Form Games

Advisor: prof. Pierpaolo Battigalli

Discussant: prof. Fabio Angelo Maccheroni

Master of Science Thesis of: Paolo Leonetti

Student ID: 1302108

Academic year: 2013-2014

Ringraziamenti

Ho iniziato questo lavoro un anno fa, cercando di scrivere qualcosa di originale, e nalmente

ce lho fatta. Questa tesi segna la ne di anni di studio, forse anche dei miei anni migliori; e

mi sembra giusto ringraziare le tante persone che ho incrociato lungo questo percorso perch`e,

se sono arrivato qui, `e soprattutto merito loro.

Il grazie pi` u grande va a mamma e pap` a. Non perch`e si deve fare cos`. Ma per avermi

incoraggiato nei momenti peggiori, e creduto in me, anche quando non ci avrei creduto

neanche io. Se `e vero che buon sangue non mente, da grande voglio diventare come te, pap`a.

E grazie a Marco, per riuscire sempre una trovare una soluzione e stare simpatico a tutti.

Non potrei avere un fratello migliore.

Grazie al prof. Pierpaolo Battigalli, che mi ha seguito in questi due anni, per aver avuto

tanta pazienza nel correggere i miei errori. Non mi riferisco a quelli della tesi, dove alla ne

ho fatto un po di testa mia, al solito. Ma per avermi fatto capire che la correttezza delle

idee di fondo `e pi` u importante di ci` o che rimane. E per i tanti pomeriggi passati a spiegarmi

in dettaglio il perch`e delle cose da fare, per averci tenuto davvero ad insegnarmi qualcosa.

Grazie al prof. Fabio Maccheroni, per essere sempre stato sempre disponibile con me, ed

aver tolto tempo prezioso alle sue attivit` a per seguirmi, forse perch`e ha davvero creduto che

sarei stato capace di fare qualcosa. Per avermi trattato alla pari, ed avermi sempre lasciato

lultima parola su cosa scegliere. Tra le tante persone che hanno contribuito alla realizzazione

di questa tesi, ci tengo a ringraziare Marco Golla, Alistair Isaac e il prof. Klaus Ritzberger.

Grazie ad Alessio per essere sempre daccordo con me, per le serate al Gelatiere, e per

cercare di organizzare i miei programmi, anche quando non vanno come previsto; e a Matteo,

che ha interessi opposti ai miei: sar` a questa la parte interessante. Grazie a Veronica, per

essere stata sempre simpatica e sorridente, e trovare le parole giuste quando cera bisogno.

Grazie a Ugo e a Saverio per non esserci persi di vista, anche a distanza. Grazie a Cristina,

per essermi stata a sentire parecchie volte, soprattutto le battute idiote.

Un ringraziamento particolare alla prof.ssa Carmen Gimenez, per la disponibilit` a mostrata

in quellultimo esame di spagnolo, e a Salvatore Tring ali e Pierfrancesco Carlucci, dai quali

ho imparato tanto negli ultimi anni, e spero altrettanto nei prossimi. Forse `e qui che inizia

la parte dicile.. o quella pi` u divertente, sar` a il tempo a dirlo.

Grazie di cuore

Contents

1 Preliminaries 1

1.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

1.2 Literature review . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

2 Extensive Form Games 6

2.1 Possibly innite trees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

2.2 Active players and available actions . . . . . . . . . . . . . . . . . . . . . . . 23

2.3 Information sets partitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31

2.4 :-reduced normal forms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34

3 A characterization of Behavioral Equivalence 40

3.1 The set of Invariant transformations . . . . . . . . . . . . . . . . . . . . . . . 40

3.2 Necessary and sucient conditions . . . . . . . . . . . . . . . . . . . . . . . 46

3.3 Extension to chance moves . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54

4 Invariance of Solution Concepts 62

4.1 Renements of equilibrium concepts . . . . . . . . . . . . . . . . . . . . . . . 63

4.2 Rationalizability in extensive form games . . . . . . . . . . . . . . . . . . . . 73

5 Closing Remarks 79

Bibliography 83

The ideas which are here expressed so

laboriously are extremely simple and should be obvious.

John Maynard Keynes.

Strategies cannot be chosen.

Pierpaolo Battigalli.

CHAPTER 1

Preliminaries

1.1 Introduction

In the context of non-cooperative game theory, where players make decisions independently,

two dierent representations, together with their variants, have been widely used to describe

interactions in dynamic games: the extensive form and the normal form. The main

dierence is that the former provides a richer structure, specifying the information available

to each active player and making explicit the order of moves: it assigns a kind of value to

the temporal variable. It does not happen in the normal form representation, since it seems

that each player chooses instantaneously his strategy, that is the prole of actions he would

take whenever he could have the possibility to do it.

The problem is that there exist situations where the richer information structure of the

extensive form can be considered redundant from some point of view, as in the case of

dynamic games where some players have to choose their moves, one by one,

1

and ignoring all

1

In Chapter 2, it will be developed a more general framework where at each non-terminal node of the

tree, one or more players may choose simultaneously their actions. The underlying motivation is twofold: on

the one hand, the normal form representation contains too little information, in the sense that no value is

assigned to time; on the other hand, the common extensive form representation where there is exactly one

active player at each non-terminal node contains too much information, since it would like to model situations

2 Chapter 1. Preliminaries

previous actions chosen by their opponents. Although the order of playing may not matter,

e.g. from some solution mode perspective, the extensive form representation requires its

specication. Nevertheless, there is no representation which is actually better than the other

one: If all dynamic games are going to be represented with their normal forms, then every

situation will look like a simultaneous moves game. That is why, a coherent theory should

explicitly highlight the connections between these two (classes of) representations. The main

question is, indeed, to provide a characterization of behavioral equivalence between possibly

innite extensive form games with imperfect information. In rough words, to characterize

all the situations where two extensive form games are essentially the same. It will be shown

that the (reduced) normal form and well-dened transformations of the extensive form can

represent in the last instance the same game structures: the underlying motivation of this

work comes from logic. In particular, it means that the focus is not related to strategic

considerations or to players rationality, but to the descriptive component of the theory of

non-cooperative games: the rules of the game.

Let us make an example to make the intuition clear: a player A is allowed to play games

and

t

which are represented in their extensive form in Figure 1.1.

A

z

1

z

2

z

3

x

a

A

z

1 A

z

2

z

3

x y

a

b

Figure 1.1: Extensive form games and

t

.

Here Z = z

1

, z

2

, z

3

stands for the set of terminal nodes; it means that not only the

preference relations of the players over Z are not specied, but also that these game structures

do not explicit the consequence functions, which represent the consequences associated to

where some ordered sequences of moves have to be treated as chosen in a simultaneous moves game. The

trick of the main result is basically to consider extensive forms as if the temporal variable loses its value,

allowing to regroup players as much as possible, until a kind of minimal extensive form is reached.

1.2. Literature review 3

each terminal node.

2

Assuming that player A knows ex-ante the extensive forms and

t

in Figure 1.1, he realizes that these game structures are representing essentially the same

situation, except for the fact that in the game

t

he needs to choose two consecutive actions

to reach the terminal nodes z

2

or z

3

. Notice that such observation has nothing to do with

the rationality of the player A. Additionally, an extensive form game does not have to be

necessarily a perfect information game: not all active players have to be always informed

about previous moves of their opponents, including the realizations of the chance player,

according to the rules of the game.

The plan of the thesis is as follows: after this rather informal introduction about the

underlying motivation, the Chapter ends with a survey of relevant works in literature which

are related to the game equivalence theme. Chapter 2 provides basic notations and the

theoretical framework for a rigorous denition of and extensive form game and related

:-reduced normal form, where : stands for the set of terminal paths. In the spirit of

the original work of Thompson (1952), the characterization of behavioral equivalence is

presented in Chapter 3; the result is then extended to extensive form games which allow

chance moves. Finally, the invariance of known solution concepts, such as some variants of

Sequential Equilibrium and extensive form rationalizability, with respect to these invariant

transformations will be analyzed in Chapter 4. Conclusions and closing remarks follow.

1.2 Literature review

There is surprisingly little work on the topic of game equivalence. Being on a theoretical

side, part of the problem is the tendency to search for the correct notion of equivalence,

as opposed to looking for many of them and what exactly is exactly kept invariant in each

case. The starting point of this line of research comes back to Thompson (1952): here

the author denes four transformations such that they preserve the strategic features of the

game structures, to mean that the reduced normal forms are essentially kept invariant. Then,

relying on the simplication of Krentel et al. (1952) and the extensive model proposed by

Kuhn (1950), he proves that two game structures share the same reduced normal form,

2

More precisely, a consequence function is a map g : Z C, where C is a set of potential consequences.

It can be assumed without loss of generality that g is surjective, that is g(Z) = C. The same cannot be said

about injectivity: it can be the case that there exist z, z

) or, equivalently, g

1

could be not represented as a function.

4 Chapter 1. Preliminaries

up to relabellings, if and only if the extensive form representation of each one can be

transformed into the other one through a nite number of applications

3

of his transformations.

These basic transformations are commonly known as Interchanging of Simultaneous Moves,

Coalescing Moves / Sequential Agent Splitting, Addition of a Superuous Move and

Ination / Deation. Contributions and extensions can be found sporadically throughout

the literature. A preliminary survey on these so-called adequacy theorems can be found

in (de Bruin, 1999). In particular, Kohlberg and Mertens (1986) extend the result to games

allowing chance players, proposing two additional game transformations, which are modied

versions of Coalescing Moves and Addition of Superuous Moves for the chance players.

Moreover, they argue that all the strategic features are unchanged through the application

of these transformations. Some years later, Elmes and Reny (1994) point out that if it is

really the case then the analysis of the strategic interactions should be restricted only to

the normal form representations. Anyway, the problem is that one of these transformations,

Ination / Deation, does not preserve the perfect recall property,

4

as it is shown in the

Figure below.

5

A

B

A A A

z

1

z

2

z

3

z

4

z

5

z

6

A

B

A A A

z

1

z

2

z

3

z

4

z

5

z

6

Figure 1.2: Perfect recall is not preserved through Ination / Deation.

3

Thompsons work deals with games dened on a nite number of nodes, where each active player has at

least two available actions. In this thesis, both restrictions are removed: it can be the case that there exist

active players with forced moves, and terminal paths can be made by some countably innite sequence of

nodes, assumed that they can be completely ordered by the immediate predecessor relation.

4

The denition of perfect recall will be given in (2.6). Informally, there is perfect recall if every active

player remembers everything he did in prior moves, and everything he knew before, whenever he has the

opportunity to choose.

5

As it is common in literature, a dashed line between two non-terminal nodes where only one player is

active means that he is not able to realize in which node of the tree he is actually playing. To be clear, in the

game the player A knows exactly the structure of the extensive form representation; nevertheless it can

be the case that he cannot observe the action chosen by the opponent, according to the rules of the game,

and hence he is not able to infer at which node he is playing.

1.2. Literature review 5

Proposing a modied version of the Addition of a Superuous Move transformation, they

show that two extensive form games with the same reduced normal forms can be transformed

into each other without appealing to the unwanted transformation of Figure 1.2, hence

preserving the perfect recall property at each transformation.

Other types of game equivalence have been analyzed in literature: for example, Hoshi and

Isaac (2010) characterize the quotient space where two extensive form games are considered

equivalent if they share the same reduced normal forms and there are no redundant players,

in the sense that players are strategically equivalent whenever they share the same payos.

Clearly, the Thompsons transformations, or the modied versions of Elmes and Reny (1994),

are still necessary to characterize this notion of equivalence. Then, they prove it is sucient

to add one more transformation, which is called Coalescing of Players.

6

Similar types

of equivalence relations between extensive form games can be found in (Dalkey, 1953) and

(Bonanno, 1992b).

Actually, the normal form representations were dened with respect to the consequences

associated with terminal nodes. Although the focus is still related to the rules of the

game, the consequence function will be not specied in the game structure, and the normal

form representation will be dened with respect to terminal paths. Hence, this theoretical

framework is neither more general, nor a special case of the previous one. It is just dierent,

and it provides another notion of game equivalence.

6

Notice that it is not an extension of Thompsons result, but a characterization of a dierent notion of

game equivalence.

CHAPTER 2

Extensive Form Games

2.1 Possibly innite trees

As recently observed by Stanley (2011, p.571), the number of systems of terminology

presently used in graph theory is equal, to a close approximation, to the number of graph

theorists. Hence, the set of notations that is going to be used throughout this thesis do not

pretend to be better than any alternative choice of terminology, as far as it is only a matter

of conventions. To start with, the blackboard letters R, Q, Z, and N stand for

R Ordered eld of real numbers,

Q Field of rational numbers,

Z Subring of integers,

N Monoid of non-negative integers.

For any collection C of sets, dene the subcollections C

and C

by

C

= C C : [C[ 1 and C

= C C : [C[ 2.

Given two non-empty sets A, B,dene AB as x A: x / B and their symmetric dierence

2.1. Possibly innite trees 7

by A B = x A B: x / A B; moreover

1

2

A

Power set of A,

(A) Set of probability measures on the measurable space (A, B),

B

A

Set of functions f : A B,

Part(A) Set of partitions of A.

For any pair of partitions P

1

, P

2

Part(A), the expressions

P

1

is ner than P

2

or P

2

is coarser than P

1

1

is a subset of some member of P

2

.

Given (possibly empty) sets A, B R, we will shorten A B with B

A

: for example

Q

(a,b]

= (a, b]

Q

= Q (a, b]

for all reals a, b such that a < b. Whenever the set A = (a, ) or [a, ) for some a R the

set B

A

will be written equivalently as B

>a

or B

a

respectively: that is why, for example, the

following representations are equivalent for the set of non-negative integers:

a R

[1,0)

, b R

(1,0]

, N = Z

>a

= Z

b

.

A relation r: A B is a map from each element a A to some (possibly empty) subset

of B, i.e. r(a) B; for all (possibly empty) subsets X A dene:

r(X) = b B: x X, b r(x),

I

r

(X) = Y 2

B

: x X, Y = r(x),

D

r

(X) = x X: b B, b r(x).

If X = A then r(X), I

r

(X) and D

r

(X) represent the range, image and domain of such relation,

1

A measurable space is a pair (A, B) where B is a -algebra dened on A; in the case A is a nite set in

this thesis it is assumed B = 2

A

; in the case A is a topological space, B is assumed to be the Borel--algebra

of A.

8 Chapter 2. Extensive Form Games

respectively. In case we would not allow r(a) to be empty for some a A, i.e. r(a)

_

2

B

_

r

(A) = A, and the relation r will be termed correspondence.

The correspondence map will be replaced with

2

and

to

mean weak surjectivity,

3

which in turn are simplied to and for the case of functions.

4

To be coherent through notations, capital letters A, B, . . . will be reserved for sets, ghotic

letters a, b, . . . for correspondence maps and A, B, . . . for collections of sets. Three important

exceptions will be made: G, T and V will be used for the class of all extensive games (possibly

with imperfect information), the set of all invariant transformations and the set of rooted

trees, respectively. Calligraphic letters /, B, . . . will be used only to represents objects with

particular characteristics, e.g. a subcollections of extensive games.

Denition 1. A poset (partially ordered set) is an ordered pair (V, _) of a (possibly innite)

non-empty set V of vertices endowed with a binary relation _ contained in V V such that

the relation _ is:

1. reexive, i.e. V, _ ;

2. transitive, i.e. ,

t

,

tt

V, ( _

t

t

_

tt

) = _

tt

;

3. antisymmetric, i.e. ,

t

V, ( _

t

t

_ ) = =

t

.

Notice that, according to (Diestel, 2000), a binary relation _ which satises only 1 and 2

will be called (partial) pre-order, while if it saties 1, 2 and 3 it will be called equivalence,

where

3. symmetric, i.e. ,

t

V, _

t

=

t

_ .

2

Recall that a correspondence r: A B has the property of strong injectivity whenever r(a) r(a

) ,=

if and only if a = a

) if and only if

a = a

then it has the strong injectivity property if and only if it has the weak injectivity property.

3

Recall that a correspondence r: A B has the property of strong surjectivity whenever I

r

(A) = (2

B

)

,

and it has the property of weak surjectivity whenever r(A) = B. Again, if r(a) is a singleton for all a A

then it has the strong surjectivity property if and only if it has the weak surjectivity property.

4

Notice that, formally, a function is not a correspondence r: A B such that [r(a)[ = 1 for all a A.

Indeed r(a) is a singleton in the collection of non-empty subsets

_

2

B

_

element. If f : A B is a function then f(a) B, hence it is not a set. Obviously, there exists a isomorphism

between the class of correspondences r: A B such that r(a) is a singleton for all a A and the class of

functions f B

A

.

2.1. Possibly innite trees 9

Since it will be convenient in the description of the model, also the following notation is going

to be used: the rst one represents the strict predecessor relation, while the second one

stands for the immediate predecessor.

t

( _

t

) ( ,=

t

),

t

((

t

) (

tt

V, _

tt

_

t

)) =

tt

,

t

.

Notice that the a poset is only a particular instance of the notion of graph, intended

as a triple (V, E, ) where V and E are (possibly innite) sets of vertices and edges, and

the function : E

__

V

2

__

maps each edge to an unordered set of vertices ,

t

, where

and

t

are not necessarily distinct.

5

The most important dierence arises not on the fact

that the image (e) is unordered (indeed a triple (V, E,

t

) with the ordering requirement

t

: E V V is just called directed graph), but on the fact that the map is not necessarily

injective, i.e. we can have (e) = (e

t

) for some distinct e, e

t

E.

Denition 2. A tree is poset (V, _) which veries the following conditions:

4. If

t

and

tt

for some ,

t

,

tt

V then

t

=

tt

.

5. There exists a root

r

such that

r

_ for all V .

To be precise, if V is a nite set then the Denition 2 is equivalent to the usual meaning of

tree.Otherwise it represents a larger class of posets (in particular, it is common to restrict

condition 4 to postulate always the existence of the immediate predecessor, except for the

root

r

). According to these notation, a tree (V, _) can be equivalently seen as a directed

graph (V, E,

t

) such that the map

t

is injective, (E) = V , there do not exist cycles,

6

and

there do not exist proper subsets V

t

V and E

t

E such that (V

t

, E

t

,

t

[

E

) with the same

properties. To make things clear, Figure 2.1 shows four examples of (nite) graphs: bullets

stand for vertices and lines stand for edges; they can be modied (each one in exactly 2

[E[

ways) to be directed graphs, as shown for example in Figure 2.2.

5

Recall that if A is a set such that [A[ 2 and b a positive integer such that b [A[ then the multibinomial

__

A

b

__

represents the collection of sets of the forma

1

, . . . , a

k

for some a

1

, . . . , a

b

A not necessarily distinct.

In particular if A is nite then

__

A

b

__

= [A[

b

.

6

Given a directed graph (V, E,

), a cycle is a sequence (

1

, e

1

,

2

, e

2

, . . . ,

k

, e

k

) such that

(e

i

) =

(

i

,

i+1

) for all i [1, k 1]

Z

and

(e

k

) = (

k

,

1

), for some edges e

1

, . . . , e

k

E and some vertices

1

, . . . ,

k

V .

10 Chapter 2. Extensive Form Games

All directed graphs in Figure 2.2 cannot be seen as trees, each one for a dierent reason.

The rst three ones cannot be even considered partially ordered sets: in the rst one the map

t

is not injective, i.e.

t

: E , V ; in the second one there exists a cycle, and in particular it

violates the antysimmetric property of the binary relation _; in the third one the transitive

property is not satised; the last one is a poset, but there exists non-empty proper subset

V

t

V such that (V

t

, _ [

V

) is still a poset (and moreover there does not exist a root

r

).

An example of tree can be seen in Figure 2.3.

2.1. Possibly innite trees 11

Such a tree can be drawn equivalent as in Figure 2.4: the vertex

r

on the top precedes all

other ones, i.e.

r

_ for all V . Let us dene V the set of rooted trees.

Lemma 1. The root

r

of (V, _) V is unique.

Proof. On the one hand, the existence of such a vertex is guaranteed by the condition 5

of Denition 2. On the other hand, the root has to be unique: suppose for the sake of

contradiction that there exists another

t

r

such that

t

r

_ for all V . Then

r

_

t

r

and

t

r

_

r

. By the antisymmetric property of the relation _ given in the condition 3 of

Denition 1 we must have

r

=

t

r

.

r

Figure 2.4: The same tree of Figure 2.3.

12 Chapter 2. Extensive Form Games

Lemma 2. Given (V, _) V with root

r

such that the set V :

r

is well-dened,

there exists a unique P Part (V

r

) such that if P P then (P, _ [

P

) V.

Proof. First, let us prove the existence of at least one such partition P of the set V

r

:

dene the set of vertices V

t

= V :

r

, and also V

= V :

t

_ for each

t

V

t

. Clearly P = V

V

Part (V

r

) and (V

, _ [

V

) V for all

t

V

t

.

Suppose that there exists another partition P

t

dierent from the previous one P, which

satises the assumption as well. Then there exist P P

t

and distinct

t

,

tt

V

t

such that

(P V

,= ) (P V

,= ) .

Hence some distinct vertices

1

,

2

P such that

1

P V

and

2

P V

are well-

dened. Since (P, _ [

P

) belongs to V by assumption, there exists a root

p

P such that

p

_ for all P, which is unique according to Lemma 1. In particular

p

_

1

and

p

_

2

, and at the same time

(

r

t

_

1

) (

r

tt

_

2

) .

As far as

t

,=

tt

, by construction every pair of trees with roots

t

and

tt

have no elements

in common, that is V

p

t

and

p

tt

. The

unique possible case is

p

=

r

, which is a contradiction since it was assumed that

p

P P

t

Part (V

r

) .

Let s be the correspondence such that s() is the (non-empty) subset of vertices which

weakly precedes ,

7

that is

s: V V

t

V :

t

_ .

Morever, let s be the function such that s() is the vertex such that s() , whenever it

7

Indeed

r

s() for all V , hence s is a correspondence.

2.1. Possibly innite trees 13

can be dened. Call D

s

(V ) V the domain of such function,

8

then

s: D

s

(V ) V

s() such that s() .

Denition 3. Given a tree (V, _), dene V the collection of all sets V

t

(2

V

)

which can

be completely ordered by the immediate relation , i.e. such that there exists a path

9

t

. . . . . .

tt

with

t

, . . . , . . . ,

tt

= V

t

.

In particular it implies that all vertices dierent from the root

r

which belong to some

V

t

V have to have a well-dened predecessor, so that the following chain of inclusions

holds:

V

V

V

t

D

s

(V )

r

V.

Lemma 3. If (V, _) V and V

t

V then V

t

is nite or at most countable.

Proof. If V

t

is a nite set then the claim is trivial. Otherwise [V

t

[ = , and according to

Denition 3 the condition V

t

V implies that there exists a path

t

. . . . . .

tt

such that

t

, . . . , . . . ,

tt

= V

t

. Hence

10

[N[ [V

t

[ 2[N[ = [N[ = [V

t

[ = [N[.

Lemma 4. Fix a tree (V, _) V and a vertex V

r

. Then

s() V s() (D

s

(V )

r

) (D

s

1(V ) ) .

Proof. The if part trivially follows by denitions. For the only if part, suppose that s()

belongs to V , i.e. it can be completely ordered by the immediate relation , in a path of

8

In particular the domain of such function veries D

s

(V ) V

r

. It is possible also that D

s

(V ) is a

proper subset (possibly the empty-set) of V

r

, as it is going to be shown in Remark 2, or simply choosing

(V, _) = ([0, 1]

R

, ).

9

Notice that the lenght of a path, that is [V

[, is allowed to be also (possibly uncountable) innite.

10

Recall the smallest order of innity is the one of the set of (positive) integers, so that [X[ [N[ for all

sets X such that [X[ = .

14 Chapter 2. Extensive Form Games

the form

11

r

. . . . . . . (2.1)

Then s(

t

) is well-dened for all

t

D

s

(V )

r

, so that (s

n

())

nN

represents the

(countable) sequence of vertices in such path starting from the right. Also s

1

(

t

) s()

is non-empty

12

(or better, it is a singleton) for all

t

D

s

1(V ) . It means that iterating

such function we can construct the countable sequence starting from the left at the root

r

. It implies that we can order with countably many points of s() in the path (2.1) at

the left and at the right. Adding the fact that s() can be only nite or at most countable

by Lemma 3, the proof is complete.

Moreover, such path (2.1) has to be unique. Suppose for the sake of contradiction that

there exists a vertex V

r

with (at least) two distinct paths from

r

to itself, i.e.

there exist ,

t

,

tt

V such that

t

,=

tt

,

r

. . .

t

_ and

r

. . .

tt

_ .

In particular it implies that

t

V :

t

_

t

tt

V :

tt

_

tt

, which is impossible,

as far as at the same time by Lemma 2

t

V :

t

_

t

tt

V :

tt

_

tt

= .

As immediate corollary, the following inclusion holds:

s (D

s

(V )) (D

s

(V )

r

) (D

s

1(V ) ) .

Special labelings are going to be assigned to some subsets of vertices with useful properties,

the rst one related to the closeness to (nite) terminal nodes, the second one with respect

to the tree representation in Hasse diagram (Birkho, 1948).

11

Indeed

r

, which is unique according to Lemma 1, belongs to s().

12

Recall that if f : A B is a function then the inverse map f

1

: B A is a correspondence if and only

if f is surjective, i.e. f : A B.

2.1. Possibly innite trees 15

For all (V, _) V, dene the (possibly nite) sequence of sets

_

V

(n)

_

nN

by

V

(0)

= V,

V

(n+1)

= V

(n)

:

t

V

(n)

,

t

, for all n N

whenever possible, and in particular when [V

(n)

[ 2.

Moreover, dene the sequence of sets

_

Z

(n)

_

nN

by

Z

(0)

= V : (

t

V _

t

) = ( =

t

),

Z

(n+1)

= V :

t

Z

(n)

,

t

, for all n N

whenever possible, i.e. whenever Z

(n)

D

s

(V ). Notice that from the denition there is no

reason to state that Z

(0)

is well-dened. In rough words, the sequence

_

V

(n)

_

nN

aims to

represent the whole set of vertices V after exactly n consecutive deletion of terminal nodes

(whenever such operation is possible); for example V

(1)

stands for non-terminal nodes, which

is a well-dened sets for a tree (V, _) V if and only if Z

(0)

D

s

(V ). Meanwhile, the

sequence

_

Z

(n)

_

nN

represents the set of nodes V such that there are exactly other n

distinct vertices which follow itself.

Remark 1. The identity

nN

Z

(n)

= V is false in general, even in the case that the whole

sequence (Z

(n)

)

nN

is well-dened. As example, choose the tree (V, _) such that

V = [0, 1]

R

_

2 +

1

n + 1

_

nN

,

where _

t

for some ,

t

V if and only if

t

. On the one hand, the set Z

(n)

is

well-dened for all n N, indeed Z

(n)

= 2 +

1

n+1

; on the other hand

nN

Z

(n)

[2, 3]

Q

,

which has to be clearly dierent from V itself.

Looking (V, _) V such that Z

(0)

is well-dened as an Hasse diagram, call V

Z-n

the greatest

subset of V made by all vertices in some nite terminal paths, i.e.

Z

(0)

: [s()[N

s(),

16 Chapter 2. Extensive Form Games

and V

Z-inf

the greatest subset of V made by innite terminal paths such that the set of

weakly predecessors s() can be ordered by the immediate relation . Hence V

Z-n

, V

Z-inf

represents a partition of the vertices which belong to paths of terminal nodes which can be

completely ordered by . Formally

V

Z-n

= V :

t

Z

(0)

, s(

t

), [s(

t

)[ N,

V

Z-inf

= V V

Z-n

:

t

Z

(0)

, s(

t

) V .

Then, let us partition V (V

Z-n

V

Z-inf

) in V

Ninf

and V

Rinf

such that the former represents

the set of vertices V belonging to some non-terminal path which can be completely

ordered by the immediate relation . More precisely

V

Ninf

= V (V

Z-n

V

Z-inf

):

(

n

)

nN

V

N

,

n

nN

, s() V ,

n

nN

Z

(0)

= ,

and

V

Rinf

= V (V

Z-n

V

Z-inf

V

Ninf

).

Notice that these sets V

Z-n

, V

Z-inf

, V

Ninf

and V

Rinf

are well-dened if and only if the

set of terminal nodes Z

(0)

is well-dened as well. Intuitively, the set V

Z-n

represents the

set of all vertices which belongs to nite path of terminal nodes Z

(0)

, i.e. s() =

, s(), s

2

(), . . . , s

n

() for some non-negative integer n, where as usual s

n

= s . . . s

. .

n times

represents the n-th iterate of the function s. The reason underlying the denition of these

sets is to classify the vertices V primarly to the existence of paths which can be ordered by

(i.e. sets V

t

V ), then to the existence of a terminal node in the path and nally to the

lenght of the path itself.

Lemma 5. Given (V, _) V such that Z

(0)

is well-dened, then:

V

Z-n

= s() V .

Proof. By assumption there exists an non-negative integer n such that s() =

2.1. Possibly innite trees 17

, s(), s

2

(), . . . , s

n

(). Recalling that

r

s(), the nite path is of the form

r

= s

n

() s

n1

() . . . s() .

In particular it means that s()

r

= s

n

()

[0,n1]

Z

D

s

(V ). Since the set s() has to

be nite, then also the following inclusion holds

s() (D

s

(V )

r

) (D

s

1(V ) ) .

The claim follows by the equivalence representation given in Lemma 4.

This Lemma allows us to describe this set equivalently as

V

Z-n

= V :

t

Z

(0)

, s(

t

) V , [s(

t

)[ N,

claring the dierence with V

Z-inf

: assumed that the set Z

(0)

can be identied, the latter

allows the set s() to be not nite, for some vertex Z

(0)

V D

s

1(V ).

Remark 2. If (V, _) V is tree such that Z

(0)

is dened, then the costructed sets are

pairwise disjoint and

V

Z-n

, V

Z-inf

, V

Ninf

, V

Rinf

Part(V )

Moreover, if V

Rinf

,= then it cannot be a nite set. Nevertheless, there is no reason to

state that V

n

is a nite set. A simple counterexample is the rooted tree (V, _) such that V

is a (possibly uncountable) innite set and the _ relation is dened only by

r

_ for all

V .

Remark 3. Although Lemma 3 proves that s() is an innite countable set for all

V

Z-inf

Z

(0)

, the same does not hold for the whole set V

Z-n

. Let us make an example: dene

the tree (V, _) with (unique) root

r

, and call T

t

tR

0

Part(V ) such that T

0

=

r

and

T

t

D

s

(V ) a countable innite set for all positive reals t. The relation _, except for the

root

r

which preceeds every V , will be choosen such that _

t

only if there exists a

t R

>0

such that ,

t

T

t

. According to this construction, V

Z-n

= V

Ninf

= V

Rinf

=

and V

Z-inf

= V . Moreover

[V

Z-n

[ [N R[ [R[,

18 Chapter 2. Extensive Form Games

implying that V

Z-n

can be also an uncountable set. Such costruction is really possibile, e.g.

choosing

t (0, 1)

R

, T

t

= t + z

zZ

and _ coincides with on each set T

t

.

Also, for all trees (V, _) V dene (whenever possible) the following sequence of sets (V

n

)

nN

by

V

0

=

r

,

V

n+1

= V :

t

V

n

,

t

, for all n N.

Again, from the denition of tree (V, _), it can be the case that V

1

is not well-dened.

Remark 4. There is no reason to state that

zZ

V

z

= V : a simple counterexample is the

rooted tree (V, _) such that V = [0, 1]

R

and _

t

if and only if

t

. Notice that in this

example V

n

is well-dened only if n = 0. Even if it was possible to well-dene such subsets,

they would be singletons for all n N, implying that V would be made by at most countably

many vertices, which is not the case: a explicit example of this type can be made on the the

same line of Remark 1.

The main results of this thesis will be shown to hold conditioning on the fact that (V, _) V

belongs to a particular subcollection of trees, which is going to be called V

std

.

Denition 4. The set V

std

is composed by all trees (V, _) V such that

1. Z

(0)

is well-dened;

2. V

Rinf

= ;

3. V Z

(0)

is at most countable.

In other words, a standard tree (V, _) is tree such that the terminal nodes are well-

dened (such set is allowed to be also uncountable), and such that the subset of non-terminal

nodes V Z

(0)

is nite or at most countable (hence, the same holds for V

(1)

, as far as

V

(1)

V Z

(0)

); in particular for all vertices V the path from the root

r

to itself can

2.1. Possibly innite trees 19

be explicitely written only with the immediate predecessor relation . Hence, the domain

of the predecessor function s veries

(V, _) V

std

= D

s

(V ) = V

r

.

Observe that if (V, _) is a tree and V = V

Z-n

then each set above is easily well-dened. Let

us see what happen in other cases.

Lemma 6. If (V, _) V

std

and V ,= V

Z-n

then V

n

is well-dened and non-empty for all

n N and

V

n

nN

Part(V ).

Proof. As far as (V, _) V

std

, the set V

Rinf

has to be empty, so that

V = V

Z-n

V

Z-inf

V

Ninf

.

Then, according to Lemma 5, if V is a vertex then s() V , i.e. the sets of (weakly)

predecessors of can be ordered by the immediate predecessor relation . If s() is nite

then there exists n N such that

s() = , s(), . . . , s

n

().

Otherwise s() is countable innite set, according to Lemma 3, and there exists a (unique)

ordering by in the form

r

. . . s

n

() s

n1

() . . . s() .

It means that it is uniquely dened a vertex

1

s() such that

r

= s(

1

). Suppose that

n

is uniquely identied for some positive integer n; then

n+1

s() is the unique vertex

such that

n

= s(

n+1

). By the principle of mathematical induction (which can be shown to

be exactly equivalent to the axiom of well-ordering) the vertex

n

is uniquely dened for all

positive integers n. It is clear now how to construct the sets V

n

for all n N.

In particular it implies that the collection of sets V

n

nN

has to be nite

13

or at most

13

Clearly, the collection V

n

nN

is nite if and only if V = V

Z-n

.

20 Chapter 2. Extensive Form Games

countable innite. Moreover, it is going to use explicitly the following well-known assumption:

AC (Axiom of Choice). For each family of non-empty sets (X

i

)

iI

, there exists (x

i

)

iI

such that x

i

X

i

for all i I.

Such axiom was formulated rst in 1904 by Ernst Zermelo in order to formalize his proof

of the well-ordering theorem: see for example (Royden, 2010). The following Lemma will be

very useful for the proof of the main result:

Lemma 7. Let X be a non-empty set and (P

i

)

iI

a family of partitions, i.e. P

i

Part(X)

for all i I. Under AC then

14

iI

P

i

Part(X).

Proof. For each x X dene the family of sets (P

i

(x))

iI

such that x P

i

(x) P

i

for all

i I. And dene P(x) =

iI

P

i

(x), for each x X. Consider the collection P(x)

xX

and suppose that P(x) P(x

t

) ,= for some x, x

t

X, i.e. there exists x

tt

X such that

x

tt

P(x) P(x

t

). If there exists j I such that P

j

(x) ,= P

j

(x

t

) then

x

tt

P(x) P(x

t

) =

iI

(P

i

(x) P

i

(x

t

)) P

j

(x) P

j

(x

t

) = ,

which is impossible. It implies that P

i

(x) = P

i

(x

t

) for all i I, i.e.

P(x) P(x

t

) ,= P(x) = P(x

t

).

Hence, it is well-dened a equivalence relation on the collection P(x)

xX

such that

P(x) P(x

t

) if and only if P(x) = P(x

t

). By AC it is possible to choose a representative

element of each equivalence class, let us say P(x)

xX

for some non-empty X

t

X.

By construction the collection P(x)

xX

is made by pairwise disjoint sets such that

xX

P(x) = X, hence

iI

P

i

= P(x)

xX

Part(X).

14

For all P

1

, P

2

Part(X), the intersection P

1

P

2

is dened as the coarsest partition P Part(X)

such that P is ner than P

1

and P

2

. Explicitely, it represents the inferior limit with respect to the partial

order of the collection of partitions, i.e. P = P

1

P

2

: P

1

P

1

, P

2

P

2

.

2.1. Possibly innite trees 21

Since it will be used often later, it is convenient also to dene the following sets, whenever

(V, _) V

std

and n N:

1

(n+1)

= V Z

(n)

.

Remark 5. According to the previous denitions, the inclusion V

(n)

1

(n)

holds for all

positive integers n. Indeed:

V

(n)

= s (V

r

) = (V

Z-n

V

Z-inf

) Z

(n1)

(V

Z-n

V

Z-inf

V

Ninf

) Z

(n1)

= V Z

(n1)

= 1

(n)

.

Finally, the set of sequences of (possible innite) terminal paths : is partitioned in :

n

and :

inf

, where

:

n

=

_

(

n

)

n[0,m]

Z

nN

V

n

:

t

Z

(0)

V

Z-n

, s(

t

) =

n

n[0,m]

Z

_

and

:

inf

=

_

(

n

)

nN

V

N

:

t

Z

(0)

V

Z-inf

, s(

t

) =

n

nN

_

_

(

n

)

nN

V

N

: m N, s(

n

n[0,m]

Z

) =

n

n[0,m]

Z

n

nN

Z

(0)

=

_

.

According to these denitions, :

n

represents the set of terminal and nite paths with can

be completely ordered by . Meanwhile, :

inf

stands for the set of innite (countable) paths

which can be also ordered by (such that they can end in some terminal Z

(0)

or

not). Clearly, if V = V

Z-n

then : = :

n

and it can be isomorphically represented by Z

(0)

.

Remark 6. Apart from the denition of the set V

Z-n

, which is mathematically clear, it

should be not obvious to state that such set can actually exist in some tree (V, ) V

std

.

According to Lemma 3, if Z

(0)

V

Z-n

then s() has to be an innite countable set, i.e.

[s()[ = [N[. On the one hand, the rst example that one can think is ([0, 1]

Q

, ), but the

problem is that it does not belong to V

std

, as far as s(1) / V .

15

On the other hand, such

example really exists: it is enough to choose (V, _), where

V =

_

1

2

1

n + 2

_

nN

and _

t

t

.

15

The reason underlying this fact is that [0, 1]

Q

is dense in [0, 1]

R

.

22 Chapter 2. Extensive Form Games

It is straightforward to check that (V, _) V

std

and V = V

Z-inf

.

For convenience, it will be useful to dene the function which associate to each tree

(V, _) V

std

the maximal lenght of paths which belong to :

n

, which has to be a nite

non-negative integer, that is

v : V

std

N,

(V, _) 1 + max

(n)

n[0,m]

Z

:

n

n[0,m]

Z

.

Hence it represents the longest nite lenght between all terminal paths, as it is going to be

seen in Section 2.3.

Remark 7. The reason underlying the denition of the collection of trees V

std

is that a

construction level-by-level is needed, in the sense that (a possibly innite sequence of) games

with simultaneous moves will be played, one for each level V

0

, V

1

, . . .. This sequence of

games stops if a terminal node is reached, i.e. such that if a game is played at some vertex

V

(1)

. It would be rather reasonable to assume that if the sequence of games is not nite

and the game with simultaneous moves at level V

n

is going to be played at time t

n

, for some

(strictly increasing) sequence of reals (t

n

)

nN

, then

liminf

nN

t

n+1

t

n

> 0.

In the real world, indeed, a minimum amount of time is always available between two

consecutive games. That is why the addition assumption on the description of the set V

std

could be given in Denition 4:

V

Z-inf

= .

As far as it does not allow to improve the results of the following sections, and neither to

obtain any technical simplication in their proofs, it is chosen to keep the more general

theoretical framework which is already dened.

2.2. Active players and available actions 23

2.2 Active players and available actions

Given a tree (V, _) V

std

, a game with simultaneous moves

16

is going to be played at each

non-terminal vertex 1

(1)

.

17

Let I be the non-empty greatest set of players who are

potentially active at least once in the tree (V, _). On the one hand, it means that it is

well-dened a weakly surjective correspondence

p: 1

(1)

I

such that p() represents the set of players who are active at the node 1

(1)

. On the other

hand, also its inverse correspondence is weakly surjective,

18

let us say

v: I

1

(1)

,

i 1

(1)

: i p().

Clearly, for each player i I the set v(i) stands for the (non-empty) greatest subset of

vertices 1

(1)

such that i is potentially active at the game with simultaneous moves which

is played at vertex .

Lemma 8. If (V, _) V

std

and sup

1

(1) [p()[ is nite then I is nite or at most countable.

Proof. Since the correspondence p is weakly surjective by construction then

I = p

_

1

(1)

_

=

1

(1)

p().

Also by assumption there exists a positive integer n such that [p()[ n for all 1

(1)

. It

follows that

[I[ =

1

(1)

p()

1

(1)

p() n[1

(1)

[.

As far as (V, _) V

std

then 1

(1)

is nite or at most countable, according to Denition 4.

The claim follows.

16

According to literature, sometimes games with simultaneous moves are called with the misleading term

strategic games.

17

Notice that if (V, _) belongs to V

std

, then 1

(1)

= V

(1)

if and only if V

Ninf

= , according to Remark 5.

18

Recall that if r: A B is a correspondence, then its inverse r

1

: B A is not in general a relation.

Moreover, r

1

is a correspondence if and only if r is weakly surjective, that is r(A) = B; in such case, r

1

is

weakly surjective too.

24 Chapter 2. Extensive Form Games

Dene / the subset of I 1

(1)

such that (i, ) / if and only if i p(), or equivalently

/ = (i, ) I 1

(1)

: v(i).

In other words, / represents the collection of all pairs (i, ) such that the player i I is

active

19

in the game with simultaneous moves played at node 1

(1)

. In particular the set

/ has to be non-empty, as it is shown in the following Lemma.

Lemma 9. If (V, _) V

std

then [/[ max[I[, [1

(1)

[.

Proof. By construction the relation p: 1

(1)

[1

(1)

[. Adding the fact that it is also weakly surjective (or equivalently that also its inverse

v is a correspondence), then also [/[ [I[.

For all pairs (i, ) /, dene A

i,

a non-empty set of actions: it represents the set of

available actions at player i I when the game with simultaneous moves is played at the

non-terminal node 1

(1)

. For all non-empty subsets B / dene the set

A

B

=

(i,)B

A

i,

. (2.2)

Notice that A

B

is well-dened even if B is not a cartesian product. To ease the notation, the

sections-type sets are

i I, A

i

= A

iv(i)

=

(i,),(i1

(1)

)

A

i,

,

and

1

(1)

, A

= A

p()

=

(i,),(I)

A

i,

.

In few words, the denition of the sets A

i,

is the natural way to assign labellings to edges

going from 1

(1)

to

t

V such that

t

. It follows that

1

(1)

, A

= s

1

().

19

Formally, a player i I is said to be active at node 1

(1)

if and only if (i, ) /.

2.2. Active players and available actions 25

In particular, the game with simultaneous moves at vertex 1

(1)

, which is going to

be termed

from here later, allows each player i p() to choose in the set of available

actions A

i,

. Hence, a sequence

(a

i,

)

ip()

A

(2.3)

uniquely identies a vertex

t

V such that

t

. From here later such vertex will be

called q

_

(a

i,

)

ip()

_

. Moreover, for all (i, ) / dene the correspondence

20

q: A

i,

s

1

(),

a

i,

_

_

_

q

_

_

a

i,

jp()\i

A

j,

_

_

_

_

_

.

In few words, the function q maps a prole of actions (a

i,

)

ip()

into the corresponding

immediate successor vertex, while the correspondence q represents all the vertices which can

be assigned only an action a

i,

has been xed.

Remark 8. It can be assumed without loss of generality that

i I, ,

t

v(i), A

i,

A

i,

,= A

i,

= A

i,

. (2.4)

Indeed, in the case that A

i,

A

i,

is non-empty, but the two sets are dierent, the player

i can realize that the set of actions available at node is dierent than the set of actions

available at

t

. Hence, he can assign new labels to one of these sets so that condition (2.4)

holds.

2.2.1 Truncated trees

Denition 5. Let (V, _) V

std

be a tree and x

t

1

(1)

and non-empty set V

t

s

1

(

t

).

21

Then

(V [

,V

, _ [

,V

) V

std

20

To be precise, the function q and the correspondence q should be indexed by and (i, ) respectively.

Nevertheless, the subscript has been hidden to ease the notation. Hence, the meaning will be clear from the

context.

21

Recall that if f : A B is a function then its inverse f

1

: B A: b a A: f(a) = b is in general

a relation; moreover, it is a correspondence if and only if the function f : A B is surjective, i.e. f(A) = B.

26 Chapter 2. Extensive Form Games

is the truncated tree such that

V [

,V

=

t

tt

V : _

tt

and

tt

_ [

,V

ttt

tt

_

ttt

.

Remark 9. Notice that if (V, _) V

std

then the identity

(V, _) = (V [

,V

, _ [

,V

)

holds if and only if

t

=

r

V

t

= V

1

.

According to Denition 5, this statement holds because V

1

= s

1

(

r

).

Denitions for sets given in Section 1.1 for the whole tree (V, _) are extended for the

truncated trees (V [

,V

, _ [

,V

): if n is a non-negative integer then

V

(n)

[

,V

= V

(n)

V [

,V

,

Z

(n)

[

,V

= Z

(n)

V [

,V

,

1

(n)

[

,V

= 1

(n)

V [

,V

.

The classication of truncated trees is in this Section because the denition of the set of

players I can be extended in a similar way. For all

t

1

(1)

and non-empty V

t

s

1

(), let

us write

I[

,V

=

V [

,V

p(),

and

I|

,V

=

V [

,V

\

p()

Clearly, I[

,V

represents the set of players who are active at least once in the truncated tree

(V [

,V

, _ [

,V

), while I|

,V

does not require that such players are active in the root

t

of

the truncated tree.

Remark 10. For all trees (V, _) V

std

and

t

, V

t

such that

t

1

(1)

and 1

(1)

s

1

(

t

),

2.2. Active players and available actions 27

the set of players I[

,V

has to be non-empty. Indeed

t

V [

,V

= p(

t

) I[

,V

.

Conversely, there is no reason to state that I|

,V

,= , and it should be clear that

I|

,V

=

t

V

(1)

.

Moreover, the trivial inclusion I|

,V

I[

,V

does not have to be necessarily strict, indeed,

the equality can be reached if and only if p(

t

) I|

,V

, that is, if each player active in the

root

t

is active at least another time in the truncated tree (V [

,V

, _ [

,V

).

Lemma 10. Given a tree (V, _) V

std

such that 1

(1)

is nite, then

V

z

z[0,v(V,)]

Z

Part(V )

Proof. If V

Z-inf

V

Ninf

,= then there exists at least a innite countable path (which can

be terminal in some Z

(0)

or not), i.e. :

inf

,= , implying that

(V

Z-inf

Z

(0)

) V

Ninf

V Z

(0)

= 1

(1)

,

which is impossible. Hence

[1

(1)

[ < V = V

Z-n

[V

(1)

[ < ,

and in such case 1

(1)

= V

(1)

. In particular the collection of set of vertices V

z

z[0,v(V,)]

Z

is

a partition of V .

Lemma 11. Given a tree (V, _) V

std

such that V is nite, then

[V [ = 1 +

z[1,v(V,)]

Z

Z

(z)

(i,),(I)

[A

i,

[.

Proof. Since 1

(1)

V then 1

(1)

has to be nite as well, and Lemma 10 applies. Hence

V

0

, . . . , V

v(V,)

Part(V ). Observe now that

z [0, v(V, _)]

Z

, Z

(z)

= V

v(V,)z

.

28 Chapter 2. Extensive Form Games

In particular

V =

_

z[0,v(V,)]

Z

V

z

=

_

z[0,v(V,)]

Z

Z

(z)

=

r

_

z[0,v(V,)1]

Z

Z

(z)

.

Counting the number of elements on each member of this identity and considering that

1

(1)

, [A

[ = [s

1

()[,

we can conclude

[V [ = 1 +

z[0,v(V,))

Z

[Z

(z)

[ = 1 +

z[1,v(V,)]

Z

Z

(z)

[A

[.

The claim follows from the Equation (2.2).

Lemma 12. Given a tree (V, _) V

std

and two partitions P, P

t

Part(/), then

22

1P

A

1

=

A

1

.

Proof. Such isomorphism, formally between sequences of cartesian sets, easily holds as far as

P Part(/), A

,

=

1P

A

1

.

As immediate corollary, if (V, _) V is a tree such that V is nite, then

iI

[A

i

[ =

V

(1)

[A

[.

2.2.2 Best-control sets

For each player i I, a (pre-non-terminal) vertex

t

1

(2)

and a non-empty set V

t

s

1

(

t

)

(that is, a set of vertices such that each one of them immediately follows

t

), a set of

22

Informally, an isomorphism

= is a map that preserves sets and relations among elements.

2.2. Active players and available actions 29

non-terminal vertices

C v(i) (V [

,V

t

)

is said to be a control-set if every terminal path allowed by the truncated tree (V [

,V

, _

[

,V

) has at least one vertex of C along its path. Formally it means that

(

n

) : (V [

,V

, _ [

,V

) =

n

C ,= . (2.5)

Here, : (V [

,V

, _ [

,V

) stands for the set of terminal paths allowed by the truncated tree

(V [

,V

, _ [

,V

) and the sequence (

n

) is intentionally not indexed to mean that it can be

nite or countable innite.

Observe that it is not assumed that player i is necessarily active at vertex , i.e. it can be

the case i / p(). Moreover such denition is meaningful only if the set 1

(2)

is well-dened,

which happens if and only if v(V, _) 2.

Denition 6. For each tree (V, _) V

std

, player i I, vertex

t

1

(2)

and non-empty set

V

t

s

1

(

t

), let C

,V

,i

be the collection of all control-sets. If this collection is non-empty,

the best-control set c

,V

,i

is dened by

c

,V

,i

= arg min

CC

,V

,i

[C[.

Intuitively, such set, whenever it is dened, represents the group of simultaneous moves

games which are nearest to the vertex 1

(2)

and where player i I is always active such

that each terminal path allowed by the truncated tree has to pass also through one of such

vertices. The following Lemma shows that the Denition 6 is well-posed.

Lemma 13. For each tree (V, _) V

std

, the following holds

[C

,V

,i

[ 1 =

arg min

CC

,V

,i

[C[

= 1.

Proof. It is enough to construct the set c

,V

,i

in an alternative way, and check that this

construction denes this set in a unique way. According to (2.5), for each allowed terminal

path (

n

) : (V [

,V

, _ [

,V

), let ((

n

)) dened by

((

n

)) = (

n

) : (V [

,V

, _ [

,V

) :

t

i p(),

30 Chapter 2. Extensive Form Games

that is, the nearest vertex along the path (

n

) which (strictly) follows

t

and such that player

i is active. Then it is clear that

c

,V

,i

=

_

(n):(V [

,V

,[

,V

)

((

n

)).

The condition C

,V

,i

,= in Lemma 13 is clearly necessary, indeed it can be the case that

such collection of sets is empty, e.g. whenever i / I|

,V

, or equivalently

v(i) V [

,V

t

.

With the same line of reasoning of the above proof, it should be clear that if the greatest set

V

t

s

1

(

t

) such that the best-control set c

,V

,i

exists (or equivalently such that C

,V

,i

,= )

then is uniquely dened as well; moreover, it is non-empty if and only if there exists a vertex

tt

1

(1)

such that

t

tt

and the collection C

,i

is non-empty. From here later, such

greatest subset V

t

s

1

(

t

) will be called V

max

,i

,

23

that is

V

max

,i

= arg max

V

s

1

(

): C

,V

,i

,=

[V

t

[.

Hence, for all players i I and vertices

t

1

(2)

, if there exists a vertex

tt

s

1

(

t

)

such that the collection C

,i

is non-empty, then it is well-dened uniquely the greatest

V

max

,i

_

2

s

1

(

)

_

,V

max

,i

,i

exists.

23

The notation V

max

,i

highlights the fact that this (non-empty) set is maximal and it denition depends on

the choice of the vertex

1

(2)

and player i I|

,s

1

(

)

.

2.3. Information sets partitions 31

2.3 Information sets partitions

Let us study now how to model the information structure and in particular how to formalize

the situation where at some point of the game the choices of some players cannot not be

observed by some other ones, according to the rules of the game.

24

Denition 7. Given a tree (V, _) V

std

, dene 1 the set of histories, which is partitioned

into

1

n

=

_

(

n

)

n[0,m]

Z

nN

V

n

: s

_

n[0,m]

Z

_

=

n

n[0,m]

Z

_

and

1

inf

=

_

(

n

)

nN

V

N

: m N, s(

n

n[0,m]

Z

) =

n

n[0,m]

Z

_

.

In few words, 1

n

represents the set of nite histories h

, where h

is the sequence of

vertices which goes from the root

r

to the vertex itself (indeed, such sequence is unique

according to Lemma 4); and 1

inf

stands for the set of countable innite sequences (

n

)

nN

such that

n

n+1

for all non-negative integers n and

0

=

r

. Notice that, according to

denitions of terminal paths, the inclusion :

n

1

n

holds; moreover, under the assumption

(V, _) V

std

, also 1

inf

= :

inf

. Hence it makes sense to dene the set of non-terminal histories

1 as

1 = 1 : = 1

n

:

n

.

Remark 11. If (V, _) V

std

then V coincides exactly with (2

V

)

, and in particular

[1[ [1

n

[ [1[ [V [.

Moreover, there exists a trivial isomorphism 1

n

= V such that if V there exists a unique

associated history h

vertex

h

V . Indeed, the following characterization can be stated

h

1

h

1

(1)

.

Finally, observe that the implication

V

Z-n

V

Ninf

= h

1

fin

24

Notice that it has nothing to do with features of players, e.g. bounded rationality, forgetfulness, etc.

32 Chapter 2. Extensive Form Games

holds in general, but the same cannot be said for vertices V

Z-inf

: according to the example

shown in Remark 6, it can be the case that

h

V

Z-inf 1

n

,= h

V

Z-inf 1

inf

,= .

It should be clear now that for all trees (V, _) V the following identity holds

v(V, ) = 1 + max

V

Zn [h

[.

and it can be the case that v(V, ) ,= 1 + max

V

[h

[.

The set of non-terminal histories of each player i I can be dened at the set of non-terminal

histories where at the last node he is active, that is

i I, 1

i

= h 1: i p(

h

).

Informally, for each player i I, a subset of vertices V

t

v(i) belongs to one of his

information set if such player is not able to realize at which particular node he is playing: at

rst sight whenever

V

A

i,

,= .

According to Remark 8, this notation can be notably simplied.

Denition 8. For each player i I in a tree (V, _) V

std

let H

i

Part(1

i

) be the

collection of information sets where each H

i

H

i

represents a class of the quotient space

1

i

/ , where

h

A

i,

= A

i,

.

Since H

i

is a partition of the set of non-terminal histories 1

i

then easily

i I, [H

i

[ [1

i

[ [1[ = [1

n

:

n

[ [V Z

(0)

[.

Considering that 1

(1)

is at most countable (indeed the tree (V, _) belongs to V

std

), the

collection of information sets has to be nite or at most countable as well. In the second

2.3. Information sets partitions 33

case, it makes sense to index each H

i

H

i

with a subscript j J, that is

H

i

= H

i,j

jJ

,

where J is a non-empty set which is nite or at most countable. A straightforward assumption

about the structure of the collection H

i

is going to be made, which is common in literature:

see for example the works of Elmes and Reny (1994), Thompson (1952) or Kreps (1990).

Perfect recall. Each player knows and remembers everything he did in prior moves.

In rough words, it states that players never forget information once it is acquired.

25

Formally

a extensive game played on a tree (V, _) V

std

satises perfect recall if

i I,

t

,

tt

v(i), ((

t

_

tt

) (h

H

i,j

H

i

)) = (

t

=

tt

). (2.6)

A special class of games are the one with perfect information, i.e. games such that

i I, H

i

= h

v(i)

,

i.e. the nest partition of 1

i

(Osborne and Rubinstein, 1994). Obviously, every game with

perfect information satises also perfect recall.

According to the above construction and observations, a (possibly innite) extensive form

game with imperfect information can be represented by a tuple

V, _, I, p, (H

i

)

iI

, (

)

1

(1) , (2.7)

25

Until recently, the framework of this thesis allowed the structure of information sets H

i

to violate perfect

recall. Following a mathematical point of view, I was convinced that this additional assumption was in some

sense restrictive, as far as the main result holds only in a proper subset of possible games. As my advisor

P. Battigalli noticed, my belief was not correct: Historically, the violation of perfect recall was introduced

in the rules of the game to represent with a technical trick the popular card game of bridge between two

pairs of players as a two-players game, allowing forgetfulness (von Neumann and Morgenstern, 1953). The

fact is that, apart from the technical trick, the violation of this property has nothing to do with the rules

of the game, i.e. depending on last instance only on the intrinsic features of the players and their memory.

Nevertheless, it can be shown without much diculty that all the results which are going to be proved in the

following sections hold also for games without perfect recall, conditioning on the fact that it is assumed the

knowledge of the sequence of partitions (P

i

)

iI

iI

Part (v(i)) which represents the points where such

property does not hold, relying on the trivial isomorphism 1

i

= v(i) for all i I.

34 Chapter 2. Extensive Form Games

such that (V, _) V

std

and the property of perfect recall given in (2.6) is satised. The

collection of such extensive games will be denoted with G.

2.4 :-reduced normal forms

In game theory, the term strategy is sometimes wrongly confused with move. On the

one hand, the latter is an action taken at the some point of the game, that is a

i,

A

i,

for

some (i, ) /. On the other hand, the former is a complete algorithm which completely

denes the evolution at every possible situation where the players could be active. As far as

by construction each player i I is not able to distinguish between histories in the same

information set, i.e. histories which belong to the same element of the quotient space 1

i

/ ,

then a strategy has to be dened a ordered sequences of actions, one for each vertex associated

with a histories in each information set.

26

Denition 9. Given a game G, the set of strategies of player i I is dened as

S

i

=

(h

i,j

)

jJ

jJ

H

i,j

A

i,

h

i,j

. (2.8)

According to the construction of the information partition H

i

= H

i,j

jJ

given in Denition

8, the cartesian product S

i

is invariant to the choice of the sequence (h

i,j

)

jJ

jJ

H

i,j

:

again, such choice is possible thanks to the AC. Denote also with S the set of sequences of

strategies of each player, that is

iI

S

i

.

27

Lemma 14. Given a game G and a prole of strategies s S, the terminal path z :

is uniquely dened.

Proof. Suppose for the sake of contradiction that there exists a strategy s = (s

i

)

iI

iI

S

i

such that it allows (at least) two distinct terminal paths z, z

t

:, let us say z = (

n

) and

26

That is the reason why in literature games with simultaneous are (wrongly, again) dened strategic

games.

27

Notice that the isomorphism between cartesian products S

=

iI

(hi,j)

jJ

jJ

Hi,j

A

i,

h

i,j

is not

simply an identity.

2.4. :-reduced normal forms 35

z

t

= (

t

n

).

28

Then the set

V

t

=

n

t

n

r

has to belong to V

t

) and nite (in the opposite case

it should be

n

=

t

n

= z = z

t

). In particular V

t

belongs to V , meaning that it can

be completely ordered by the immediate relation . Call the vertex such that _ for

all V

t

, which exists and it is uniquely dened. Then by construction

s

1

()

n

, = s

1

()

t

n

.

It means that the prole of strategies s S allows the game with simultaneous moves

to

be played, and that (at least) two distinct vertices will be identied there by a sequence of

actions (a

i,

)

ip()

A

Then, Lemma 14 explains that the map : S :, which associates each strategy s S

into the terminal path z : is well-dened. From here later, it will be termed outcome

function.

Denition 10. For each extensive form game = V, _, I, p, (H

i

)

iI

, (

)

1

(1) G,

dene its :-normal form as the normal form game

29

nf

:

() = I, (S

i

)

iI

, :, .

As far as the aim of this thesis is to obtain a complete characterization of behavioral

equivalence, it is natural to consider the sequence of partitions

(S

i

)

iI

iI

Part(S

i

)

obtained by behaviorally equivalent strategies. Here, for each player i I, two strategies

28

Again, the subscript is hidden to mean that such sequence can be nite or at most innite countable.

29

The normal form game is a description of a game: it is not graphical per se, but rather represents

the extensive game by way of a (possibly innite) matrix. Usually it is dened with respect to conceivable

strategies of each player, and associated payos. As far as we want to take into consideration only the rules

of the game, the denition of normal form has been restricted to terminal paths.

36 Chapter 2. Extensive Form Games

s

i

, s

t

i

S

i

are said to be behaviorally equivalent, if and only if

j I i, s

j

S

j

,

_

s

i

, (s

j

)

jI\i

_

=

_

s

t

i

, (s

j

)

jI\i

_

. (2.9)

Let us dene the equivalence relation

30

on S

i

such that s

i

s

t

i

if and only if they satisfy

(2.9).

Denition 11. For each extensive form game = V, _, I, p, (H

i

)

iI

, (

)

1

(1) G,

dene its :-reduced normal form as the normal form game

rnf

:

() = I, (S

i

)

iI

, :, ,

where S

i

= S

i

/ is the quotient space of behaviorally equivalent strategies.

Notice that the function has to be surjective by construction: indeed for each terminal

path (

n

) :, a prole of strategies (s

i

)

iI

S can be constructed such that each game with

simultaneous move

n

uniquely identies the vertex

n+1

by a prole of actions (a

i,n

)

ip(n)

.

It allows to conclude that its inverse

1

and projections proj

S

i

have to be correspondences.

Lemma 15. Given a game G which can be represented by (2.7), the following identities

hold

i I, S

i

=

(s

j

)

jI\{i}

jI\{i}

S

j

_

_

proj

S

i

_

1

(z)

_

z:

.

Proof. For each prole of strategies of the opponents (s

j

)

jI\i

jI\i

S

j

, clearly

_

_

proj

S

i

_

1

(z)

_

z:

Part(S

i

).

Indeed the inverse map of the function proj

S

i

: S

i

: allow us to obtain the obtain

the partition of S

i

which is behaviorally equivalent to the xed prole of strategies of the

opponents (s

j

)

jI\i

. Under the AC, the claim follows by Lemma 7.

Notice that, according to the Denition 11, the :-reduced normal form of each game

G is not able to recognize if a player is active somewhere with a forced move. In

30

Recall that an equivalence is relation which satises the reexive, transitive and symmetric properties.

2.4. :-reduced normal forms 37

particular, it will be useful to dene a modied version of the rnf

:

where a player is deleted

from the set of active players whenever he has only forced actions.

Denition 12. For each extensive form game = V, _, I, p, (H

i

)

iI

, (

)

1

(1) G,

dene its :-best reduced normal form as the normal form game

brnf

:

() =

_

I

t

, (S

i

)

iI

, :, proj

iI

S

i

_

,

where S

i

= S

i

/ , and I

t

= i I : [S

i

[ , = 1.

Now, it is presented an algorithm to explicitly calculate the partition S

i

, assumed that

S

i

is a nite or at most countable set in a game G:

1. Choose randomly a partition P Part(S

i

).

2. Denote r(P) the reduction of the independent sets P P with respect to behavioral

equivalence, i.e.

r(P) = P/

PP

Part(S

i

).

3. According to Lemma 7, it is well-dened the partition

r

(P) =

nN

r

n

(P),

where as usual r

0

(P) = P for all P Part(S

i

). For example, the sequence of

partitions (r

n

(P))

nN

becomes denitively constant whenever S

i

is a nite set: indeed

P is coarser than r(P), which is in turn coarser than s

i

s

i

S

i

.

4. Let P

j

jJ

Part(S

i

) the collection of all partitions of S

i

such that P

j

is coarser

than r

(P) and s

i

, s

t

i

P

j

P

j

= s

i

s

t

i

.

31

Then

32

S

i

=

jJ

P

j

.

31

In other words, it means that P

j

is a partition of S

i

such that it is coarser than r

S

i

. The advantage of this algorithm is that the reduction processes can be applied to smaller subsets of S

i

,

i.e. to each P P, allowing probably a smaller amount of computations.

32

Symmetrically, for all P

1

, P

2

Part(X), the union P

1

P

2

is dened as the nest partition

P Part(X) such that P is coarser than P

1

and P

2

. Explicitly, it represents the superior limit with

respect to the partial order of the collection of partitions, i.e. P = P

1

P

2

: P

1

P

1

, P

2

P

2

.

38 Chapter 2. Extensive Form Games

It is clear that, if S

i

is a nite set, then this algorithm ends in a nite number of steps.

More precisely, r

(P) = r

n

(P) for all integers n [S

i

[, and we can obtain r

(P) in at

most [S

i

[ steps. Moreover, the collection of (P

j

)

jJ

at point 4 has a number of elements [J[

which is smaller than the number of partitions of [1, [r

(P)[]

Z

, which is in turn smaller than

2

[r

(P)[

1 (that is, the number of non-empty subsets of [1, [r

(P)[]

Z

). Considering that

[r

(P)[ [S

i

[, the inequality [J[ < 2

[S

i

[

holds. In conclusion, if S

i

is a nite set then the

quotient space S

i

can be calculated in less than [S

i

[ +2

[S

i

[

reduction processes. Let us rene

a bit this upper bound.

Lemma 16. The following inequality holds for all positive integers n:

[Part ([1, n]

N

)[

_

n + 1

2

_

n

.

Proof. Let us verify the claim by induction. It is trivially veried for n = 1. Suppose that

it has been proved that [Part ([1, n]

N

)[ n! for some positive integer n. Then each partition

in Part ([1, n + 1]

N

) can be in form P, n where P Part ([1, n]

N

) or n belongs to some

P P. Considering that [P[ n then

[Part ([1, n + 1]

N

)[ (n + 1) [Part ([1, n]

N

)[ (n + 1)!.

Then it could be enough to prove that 2

n

n! (n + 1)

n

for all positive integers n. And this

is the case: if n is odd then

n! =

j[

1n

2

,

n1

2

]

Z

n + 2j + 1

2

=

n + 1

2

j[1,

n1

2

]

Z

_

n + 1

2

_

2

j

2

,

otherwise

n! =

j[1n,n1]

2Z+1

n + j + 1

2

=

n + 1

2

j[1,n1]

2Z+1

_

n + 1

2

_

2

j

2

.

It completes the proof, since they are clearly not greater than 2

n

(n + 1)

n

.

Of course, with heavy machinery like partial Abel summation, Laplace approximation or

asymptotic formulae of Hardy and Ramanujan, the upper bound given in Lemma 16 can be

2.4. :-reduced normal forms 39

considerably improved. Nevertheless, it is enough to prove that, if G is taken such that

I and S

i

are nite sets, then the number of steps required by such algorithm to compute the

rnf

:

() from the nf

:

() is at most

iI

[S

i

[ +

_

[S

i

[+1

2

_

[S

i

[

[I[ +

iI

[S

i

[

[S

i

[

.

Lemma 17. For each game G such that I and S

i

are nite sets, call c() the number of

comparisons between pair of strategies s

i

, s

t

i

S

i

to check if they are behaviorally equivalent.

Then

[I[ +

iI

[S

i

[ c()

iI

[S

i

[

2

/2.

Proof. As far as S

i

is a nite set for all i I, then it is enough to check which strategies

s

i

S

i

are behaviorally equivalent to a xed s

i

S

i

. In the best case S

i

/ = S

i

and it is

enough to check exactly [S

i

[ 1 equivalence relations. In the worst case S

i

/ = s

i

s

i

S

i

so that exactly

_

[S

i

[

2

_

comparisons are needed. The claim follows considering that

_

n

2

_

is not

greater than n

2

/2 for all integers n 2.

Remark 12. It should be clear now, according to this construction, why the property of

perfect recall has been assumed in the collection of games G: it is not possible from the

:-reduced normal form rnf

:

() to infer if this property has been violated or not. Take as

example the games in Figure 2.5.

A

B A

z

2

z

3

z

4

z

1

a

1

a

2

b

1

b

2

a

1

a

2

A

z

1 B

z

2

z

3

a

1

a

2

b

1

b

2

Figure 2.5: Extensive form games and

t

, respectively.

Clearly

t

satises the property of perfect recall given in (2.6), while does not. Nevertheless

nf

:

() = rnf

:

()

= rnf

:

(

t

) = nf

:

(

t

).

CHAPTER 3

A characterization of Behavioral Equivalence

3.1 The set of Invariant transformations

As far as the main result of this work aims to provide a complete characterization of behavioral

equivalence between extensive form games with imperfect information, let us introduce such

equivalence relation, which will be denoted with =. Two extensive form games ,

t

G are

said to be behaviorally equivalent if they share the same :-best reduced normal form,

1

i.e.

=

t

brnf

:

()

= brnf

:

(

t

). (3.1)

Let G Part(G) be the partition of the collection of extensive form games which is obtained

by the quotient space G/ =. It is going to be proved that two extensive form games ,

t

belong to the same member G G if and only if one can be transformed into the other one

through a sequence of predened transformations.

Denition 13. A transformation T : D

T

(G) G is dened invariant if D

T

(G) G is

1

Here, the adjective same stands for up to isomorphism, which in turn means up to relabellings of

everything, preserving its structure.

3.1. The set of Invariant transformations 41

non-empty and

D

T

(G), =T ().

In other words, a transformation is said to be invariant whenever it can be applied to

some extensive form game, so that the (best) reduced normal form with respect to terminal

paths of the transformed game is essentially the same of the original one. Any invariant

transformation T can be made surjective, restricting its codomain to some non-empty subset

of G. Indeed

T : D

T

(G) I

T

(G),

where I

T

(G) =

D

T

(G)

T (). Let T be the set of all invariant transformations. Hence,

the main question of this work can be simply rewritten as

Find all T T.

Let us combine now the construction of best-control sets given in Subsection 2.2.2 and

the structure of the information sets partition given in Section 2.3.

Denition 14. Let be an extensive form game in G. For all vertices 1

(2)

dene the

(possibly empty) set of players X

by

X

=

_

i I|

,s

1

()

:

_

V

max

,i

= s

1

()

_

_

H

i

H

i

, h

(

,V

max

,i

,i

H

i

__

. (3.2)

Hence, X

represents the set of all players which are active at least once in the subset of

vertices V [

,s

1

()

of the truncated tree

_

V [

,s

1

()

, _ [

,s

1

()

_

2

such that their best-

control sets coincides with the whole s

1

() and all the associated histories belong to the

some information set. In other words, it means that a player, which is active in the truncated

tree, belongs to the set X

the game, any (prole of) action previously chosen by players in p() at the simultaneous

moves game played at vertex .

Lemma 18. If G and 1

(2)

, then the following inclusion holds

X

I[

,s

1

()

p().

2

Notice that it does not imply that a player cannot be active at vertex of the truncated tree.

42 Chapter 3. A characterization of Behavioral Equivalence

Proof. Suppose indeed that there exists a player i X

case that V

max

,i

= s

1

() and A

i,

= A

i,

for all ,

t

c

,s

1

(),i

. In particular it implies that

the property of perfect recall given in (2.6) does not hold. This is a contradiction, as far as

by assumption the extensive form game belongs to G.

Notice that the inclusion obtained in the Lemma 18 is stronger than the one given in (3.2),

indeed I[

,s

1

()

p() I|

,s

1

()

. Similarly, the following Denition will be convenient to

a better understanding of the two elementary invariant transformations, which are going to

be presented in a few.

Denition 15. Let be an extensive form game in G. For all vertices 1

(2)

dene the

(possibly empty) set of players Y

by

Y

=

_

i p(): a

i,

A

i,

, q(a

i,

) V

max

,i

, (H

i

H

i

, q(a

i,

) H

i

)

_

. (3.3)

Hence, Y

(2)

with an available

action a

i,

A

i,

such that the control set c

,q(a

i,

),i

exists, and the associated histories

belong to some information set. In other words, it means that a player i p() belongs to

Y

if and only if there exists an action such that, whatever his opponents choose, he will

play again for sure and at each allowed terminal path he will nd always some xed set of

available actions (which has to be dierent from A

i,

as far as the game has perfect recall).

Let us start dening two invariant transformations, commonly known as Interchanging of

Simultaneous Moves and Coalescing Moves / Sequential Agent Splitting. As far as the

theoretical framework allows the existence of pair (i, ) / such that [A

i,

[ = 1, we need

to introduce also a preliminary transformation which will be dened Deletion of Forced

Moves, and call F

1

(1)

, F

= i p(): [A

i,

[ = 1.

3.1.1 Deletion of Forced Moves

This preliminary and trivial transformation, which is shortened with T

0

, will simply delete

the forced actions. In other words, it will remove players who are forced to be active

3.1. The set of Invariant transformations 43

according to the rules of the game. Then, the domain of T

0

is dened as

D

T

0

(G) =

_

G:

1

(1)

F

,=

_

.

Suppose that an extensive form game = V, _, I, p, (H

i

)

iI

, (

)

1

(1) belongs to D

T

0

(G).

Then there exists a vertex

0

1

(1)

such that F

0

is non-empty. The transformed extensive

form game

T

0

() = V

t

, _

t

, I

t

, p

t

, (H

t

i

)

iI

, (

t

)

1

(1)

is dened by:

1. The tree (V, _) V

std

is modied such that V

0

V

t

and equality is reached if

and only if p(

0

) = F

0

. The binary relation _ is modied accordingly, i.e. _

t

=_ [

V

.

2. The set of players may reduced, meaning that I

t

= I i F

0

: i p() = =

0

.

Except these removed players, the correspondence p

t

is constant on all other vertices.

3. For each player i I

t

and vertices 1

(1)

, simply A

t

i,

= A

i,

. The information set

partitions (H

t

i

)

iI

and the simultaneous moves games (

t

)

1

(1) change accordingly.

In rough words, the Deletion of Forced Moves transformation deletes all the actions of players

i F

0

; nothing else is modied in extensive form representation of the transformed game.

3.1.2 Interchanging of Simultaneous Moves

The domain of this transformation, which will be termed T

1

, is dened as

3

D

T

1

(G) =

_

G:

1

(2)

X

,=

_

.

Suppose that an extensive form game = V, _, I, p, (H

i

)

iI

, (

)

1

(1) belongs to D

T

1

(G).

Then there exists a vertex

0

1

(2)

such that X

0

is non-empty. The transformed extensive

form game

T

1

() = V

t

, _

t

, I

t

, p

t

, (H

t

i

)

iI

, (

t

)

1

(1)

3

A special case of this transformation T

1

is the so-called Interchange of Contiguous Simultaneous Moves

dened in (Bonanno, 1992b), which is turn is a generalization of the Thompsons transformation Interchange

of Simultaneous Moves.

44 Chapter 3. A characterization of Behavioral Equivalence

is dened by:

1. The tree (V, _) V

std

is modied such that a vertex in the truncated tree

_

V [

0

,s

1

(

0

)

, _ [

0

,s

1

(

0

)

_

is deleted if and only if the set of the players active at

is exactly X

0

and it belong the best-control set c

0

,s

1

(

0

),i

; the binary relation _ is

modied accordingly, i.e.

V

t

= V c

0

,s

1

(

0

),i

: p() = X

0

and _

t

=_ [

V

.

2. The set of players does not change, meaning that I

t

= I; but some of them, the ones

playing in c

0

,s

1

(

0

),i

, are shifted back, meaning that

p

t

() =

_

_

p() if 1

(1)

0

c

0

,s

1

(

0

),i

_

,

p() X

0

if =

0

,

p() X

0

otherwise.

3. For each player i I

t

and vertices 1

(1)

0

such that i p

t

(), simply A

t

i,

= A

i,

.

Otherwise

i X

0

, c

0

,s

1

(

0

),i

A

t

i,

0

= A

i,

.

The information set partitions (H

t

i

)

iI

and the simultaneous moves games (

t

)

1

(1)

change accordingly.

In rough words, the Interchanging of Simultaneous Moves transformation moves all the

actions of player i X

0

, which cannot distinguish by construction any chosen move at vertex

0

, to the vertex

0

itself. Other vertices disappear if and only if the set of active players

of the associated simultaneous moves games is X

0

. An example of this transformation is

shown in Figure 4.10.

Remark 13. Notice that the transformation T

1

does not essentially modify the structure of

the information set partitions. It means that if D

T

1

(G) then

i I, H

t

i

= H

i

.

3.1. The set of Invariant transformations 45

3.1.3 Coalescing Moves / Sequential Agent Splitting

In a similar fashion, the domain of this transformation, which will be termed T

2

, is dened

as

D

T

2

(G) =

_

G:

1

(2)

Y

,=

_

.

Suppose that an extensive form game = V, _, I, p, (H

i

)

iI

, (

)

1

(1) belongs to D

T

2

(G).

Then there exists a pair (i

0

,

0

) I 1

(2)

such that i

0

Y

0

. The transformed extensive

form game

T

2

() = V

t

, _

t

, I

t

, p

t

, (H

t

i

)

iI

, (

t

)

1

(1)

is dened by the application of the following algorithm for all players in Y

0

:

1. The tree (V, _) V

std

is modied such that a vertex in the truncated tree

_

V [

0

,s

1

(

0

)

, _ [

0

,s

1

(

0

)

_

is deleted if and only if the set of the players active at is a

singleton and it belong the control set c

0

,q(a

i

0

,

0

),i

0

; the binary relation _ is modied

accordingly, i.e.

V

t

= V c

0

,q(a

i

0

,

0

),i

: [p()[ = 1 and _

t

=_ [

V

.

2. The set of players does not change, meaning that I

t

= I; but i

0

is shifted back,

meaning that

p

t

() =

_

_

_

p() if 1

(1)

c

0

,q(a

i

0

,

0

),i

0

,

p() i

0

otherwise.

3. For each player i I

t

and vertices 1

(1)

0

such that i p

t

(), simply A

t

i,

= A

i,

.

Otherwise

i X

0

, c

0

,q(a

i

0

,

0

),i

A

t

i

0

,

0

= (A

i

0

,

0

a

i

0

,

0

) A

i

0

,

.

The information set partitions (H

t

i

)

iI

and the simultaneous moves games (

t

)

1

(1)

change accordingly.

46 Chapter 3. A characterization of Behavioral Equivalence

Loosely speaking, the Coalescing Moves transformation

4

shifts the actions of each player

i Y

0

at each c

0

,q(a

i

0

,

0

),i

to the vertex

0

itself, substituting the pure action a

i

0

,

0

.

Vertices in c

0

,q(a

i

0

,

0

),i

disappear if and only if the player i

0

is the unique active player in the

associated simultaneous moves games. An example of this transformation is shown in Figure

4.11.

3.1.4 Composition of transformations

Let us dene how a sequence of transformations T

0

, T

1

and T

2

can be applied one by one,

and when such operation is possibile.

Denition 16. For all = (

1

, . . . ,

n

) 0, 1, 2

n

, dene the composition-transformation

T

: D

T

(G) G by

D

T

(G), T

() =

_

T

n

T

n1

. . . T

1

_

(),

where its domain is recursively dened by

D

T

(G) = D

Tn

(G) T

n1

_

D

T

(

1

,...,

n1

)

(G)

_

.

The construction of the domain D

T

(G), since it is equivalent to require that the last

transformation T

n

can be applied and the extensive form game which is in the argument

argument has to be in the image set I

T

(

1

,...,

n1

)

(G). Apart from some these formal Denitions,

notice that it has not been even shown that transformations T

0

, T

1

or T

2

are invariant.

3.2 Necessary and sucient conditions

Although it does not solve the main question to nd all invariant transformations, it can be

proved that each T

is an invariant one.

4

Sequential Agent Splitting transformation stands for the inverse of Coalescing Move: If the latter is

represented by T

2

, then the former is T

1

2

.

3.2. Necessary and sucient conditions 47

Lemma 19. The compositions of Deletion of Forced Moves, Interchanging of Simultaneous

Moves and Coalescing Moves are invariant transformations, that is

nN

>0

0,1,2

n

T

T.

Proof. Let us rewrite the claim as T

T whenever 0, 1, 2

n

, for some positive integer

n, and start to prove it by induction. As basic step, if n = 1 then T

0

, T

1

and T

2

have to

belong to T. It is straightforward for T

0

. Once all possible transformations T

0

took place,

the equivalence relation =

t

collapses to rnf

:

()

= rnf

:

(

t

). Hence, on the one hand,

according to the Denition of T

1

given in Subsection 3.1.2, the transformed extensive form

game T

1

() has exactly the same set of strategies S

i

for all players i I, meaning that

D

T

1

(G), nf

:

() = nf

:

(T

1

()) .

In particular, it implies that rnf

:

()

= rnf

:

(T

1

()), so that there exists G G such

that , T

1

() G; hence T

1

has to be an invariant transformation. On the other hand,

according to the Denition of T

2

given in Subsection 3.1.3, the transformed extensive form

game T

2

() has not the same set of strategies, i.e. S

i

,= S

t

i

for at least a player i I, but it

is clear from the construction that o

i

= o

t

i

for all i I. It means that

( D

T

2

(G), rnf

:

()

= rnf

:

(T

2

())) = T

2

T.

Then, suppose there exists a positive integer m such that

n[1,m]

N

0,1,2

n

T

T.

Let us x a vector = (

1

, . . . ,

m+1

) 0, 1, 2

m+1

. By the Denition 16 of composition

transformation, we have T

= T

m+1

T

(

1

,...,m)

and its domain veries

D

T

(G) = D

T

m+1

(G) I

T

(

1

,...,m)

(G) D

T

m+1

(G).

At the same, it has been already shown that T

m+1

is an invariant transformation, and it has

been assumed by the inductive hypothesis that T

(

1

,...,m)

T. It means that

D

T

(G),

_

T

(

1

,...,m)

() =T

()

_

_

=T

(

1

,...,m)

()

_

.

Since the equivalence relation = is transitive, there exists G G such that , T

() G,

48 Chapter 3. A characterization of Behavioral Equivalence

i.e. T

T.

Remark 14. It should be clear from the proof of Lemma 19 that the the inductive

argument is only a mask, in the sense the core is represented by the fact that T

1

and T

2

are indeed invariant transformations. From this perspective, the composition of invariant

transformations

jJ

T

j

, where

j

0, 1, 2 for all j J and J is not necessarily nite set,

has to be an invariant transformation as well. In general terms, it can be rewritten as

_

J,=

_

(

j

)

jJ

0,1,2

J

_

jJ

T

j

_

T.

It is going to be shown now that it is possible to reach a kind of minimal extensive

form game through a sequence of applications of transformations T

1

and T

2

.

5

With this aim,

for all extensive form games D

T

0

(G) D

T

1

(G) D

T

2

(G) dene the non-empty set

=

_

(

j

)

jJ

: J ,= , D

(

j

)

jJ

(G)

0,1,2

(D

T

(G) I

T

(

j

)

jJ

(G))

_

.

In other words,

T

0

, T

1

and T

2

such that the new extensive form game T

(

j

)

jJ

() cannot be transformed once

more by some T

0

or T

1

or T

2

.

Lemma 20. The minimal extensive form game is uniquely dened, i.e.

_

j1,2,3

D

T

j

(G),

()

= 1.

Proof. If an extensive form game belongs to D

T

0

(G) D

T

1

(G) D

T

2

(G), then at least one

invariant transformation between T

0

, T

1

and T

2

can be applied, i.e.

1

(2)

X

,=

or

Z

(1)

F

3.1.1, 3.1.2 and 3.1.3, the application of a transformation has no eects on the potential

application of the other one: they apply jointly independently. For the transformation T

0

the argument is trivial. The same cannot be said about the eect of a transformation about

the potential application of the same transformation, on the same vertex 1

(2)

. But the

5

According to Remark 14, such sequence has not to be necessarily nite.

3.2. Necessary and sucient conditions 49

denitions of these transformations rely on the notion of control-set given in 2.2.2, which

are uniquely dened in a way such that they are as near as possible to the vertex 1

(2)

under consideration. It implies that the application of a transformation in the set T

1

, T

2

,

whenever possible, has no eects on the application of the other transformation and the

same transformation on other vertices 1

(2)

. Such independence is enough to prove the

claim.

A remarkable example which highlights such independence property and the relation with

the features of the extensive form games is given in Figure 3.1.

r

z

1

z

2

1

z

3

2

3

4

z

5

z

4

z

7

z

6

Figure 3.1: An extensive form game such that T

2

can be applied twice.

Suppose that the game is played by two players, let us say A and B, each node has exactly

one active player and that player B is active only at vertex

2

. Moreover, suppose it is the

case that there exists H H

A

such that h

1

, h

3

, h

4

H.

6

Then transformation T

2

can

be applied to the root

r

and to the vertex

1

. Again, these transformations can be applied

independently, but the resulting extensive form game will have an action, that is q

1

(z

3

),

which appears twice in the minimal form.

The problem comes from the fact that the condition h

1

h

3

violates the property of perfect

recall stated in (2.6), i.e. this extensive form game does not belong to G.

6

Such condition is equivalent to A

A,1

= A

A,3

= A

A,4

, i.e. player A is not able to realize in which

vertex of the tree he is playing, except for the root.

50 Chapter 3. A characterization of Behavioral Equivalence

According to Lemma 20, the minimal extensive form game can be nally dened by

: G G

_

_

_

T

(

j

)

jJ

() if

j0,1,2

D

T

j

(G) and (

j

)

jJ

,

otherwise.

It is clear that all the above Denitions and Lemmas can be restated in a simpler form to

avoid the transformation T

0

, assuming ex-ante that the following implication holds:

1

(1)

, i p() = [A

i,

[ 2.

Lemma 21. There exists a bijective map : brnf

:

(G) (G).

Proof. On the one hand, it is clear that if an extensive form game (G) has been xed

then its (best) reduced normal form with respect to terminal paths brnf

:

() is uniquely

identied, according to Denition 12. On the other hand, suppose that I, (o

i

)

iI

, :,

brnf

:

(G) has been xed. It has to be shown that there exists a unique (G) such that

7

i I, [o

i

[ , = 1 rnf

:

() = I, (o

i

)

iI

, :, .

With the same line of reasoning of Lemma 15, dene the sequence of partitions (P

i

)

iI

iI

Part(o

i

) by

i I, P

i

=

(s

j

)

jI\{i}

jI\{i}

S

j

_

_

proj

S

i

_

1

(z)

_

z:

. (3.4)

If P

i

= o

i

then player i is not active at the vertex

r

, meaning that p(

r

) = i I : P

i

,= o

i

.

Moreover, it is clear that if i is active then A

i,r

= P

i

, and in particular [A

i,r

[ = [P

i

[. At

this point the set of immediate successors are completely specied, as far as s

1

(

r

)

= A

r

.

Such algorithm can be repeated as much as necessary

8

to complete the extensive form

7

Recall that the condition (G) is equivalent to G

j{0,1,2}

D

Tj

(G).

8

Since belongs to G then its tree (V, _) belongs to V

std

, and in particular such algorithm could be

repeated at most countably many times. Also in such case the extensive form game (brnf

Z

()) is uniquely

dened, otherwise there should exist a vertex which is nearest to the root and such that the sequences of

partitions obtained in (3.4) dier, and this is not possible.

3.2. Necessary and sucient conditions 51

representation of the game in its minimal form (indeed, the existence of forced actions

cannot be deduced from the :-best reduced normal form).

This Lemma will be the key for the proof of the main theorem, the characterization of all

invariant transformations. Moreover, the following result gives insights on what will be the

conclusion of this work.

Lemma 22. Let ,

t

G be two extensive form games. Then

=

t

()

= (

t

).

Proof. From the denition of the equivalence relation = given in (3.1), the claim can be

rewritten as

,

t

G, brnf

:

()

= brnf

:

(

t

) ()

= (

t

).

If part. Suppose that ()

= (

t

). Recall that () represents the minimal extensive

form T

(

j

)

jJ

() for some (

j

)

jJ

j

j0,1,2

can be applied, otherwise () = ); and that

J,=

(

j

)

jJ

0,1,2

J

_

jJ

T

j

_

T

according to Lemma 19 and Remark 14. It is enough to conclude that brnf

:

()

= brnf

:

(

t

).

Figure 3.3 shows a graphical representation of this part of proof, where red lines stand for

isomorphic to.

() rnf

:

(()) brnf

:

(()) brnf

:

()

(

t

) rnf

:

((

t

)) brnf

:

((

t

)) brnf

:

(

t

)

=

T

1

, T

2

Assumption

Claim

=

T

0

=

Figure 3.2: Structure of the if part of Lemma 22.

52 Chapter 3. A characterization of Behavioral Equivalence

Only if part. Suppose that brnf

:

()

= brnf

:

(

t

). Thanks to Lemma 21, we have

(brnf

:

())

= (brnf

:

(

t

)). The map is invertible, so these extensive form-images are

uniquely dened in the set of minimal representations (G). This is enough to conclude the

proof.

brnf

:

() (brnf

:

()) ()

brnf

:

(

t

) (brnf

:

(

t

)) (

t

)

=

Assumption

Claim

=

Figure 3.3: Structure of the only if part of Lemma 22.

Finally, all ingredients are ready to cook the following.

Theorem 1. The set of all invariant transformation is given by

T =

_

J,=

_

(

j

)

jJ

0,1,2

J

_

jJ

T

j

_

.

Proof. It has been already shown in Lemma 19 and Remark 14 that

J,=

(

j

)

jJ

0,1,2

J

_

jJ

T

j

_

T.

Hence, suppose for the sake of contradiction that there exists an invariant transformation T

such that T T

J,=

(

j

)

jJ

0,1,2

J

_

jJ

T

j

_

. In particular, we must have D

T

(G) ,=

and

D

T

(G), =T (),

which in turn means brnf

:

()

= brnf

:

(T ()). According to Lemma 22, it happens if and

only if ()

= (T ()). But is the minimal extensive form representation through some

3.2. Necessary and sucient conditions 53

sequence of transformations in the set T

j

j0,1,2

. It implies that T can be represented in

the form

jJ

T

j

for some sequence (

j

)

jJ

: it is the wanted contradiction.

Actually, it means that the equivalence relation = is completely characterized. In particular,

an interesting corollary can be stated.

Corollary. Let ,

t

G such that each active player has no forced actions. Then they

share the same :-reduced normal form if and only if they can be transformed into each

other through a sequence of Interchanging of Simultanoues Moves and Coalescing Moves /

Sequential Agent Splitting.

Proof. In other words, ,

t

G are two extensive forms such that

1

(1)

(1

(1)

)

F

= .

The claim can be rewritten as rnf

:

()

= rnf

:

(

t

) if and only if

T , T

t

J,=

(

j

)

jJ

1,2

J

_

jJ

T

j

_

, T ()

= T

t

(

t

).

According to our assumptions, the transformation T

0

has no way to apply in such games.

Then rnf

:

() = brnf

:

() and rnf

:

(

t

) = brnf

:

(

t

), and the minimal extensive form

representations () and (

t

) are obtained necessarily through some sequence of T

1

and

T

2

. The claim follows by Theorem 1.

At this point, it may be interesting to check how many transformations are necessary

to obtain the minimal extensive form representation. According to the costruction of the

domains of the transformations T

j

j0,1,2

we have that the total number of transformations

are exactly

_

1

(1)

: F

,=

_

_

1

(2)

: X

,=

_

_

1

(2)

: Y

,=

_

,

which is upper bounded by [1

(1)

[ +2[1

(2)

[. In particular, if V is a nite set then such number

is smaller than 3[V

(1)

[.

It is also remarkable that all the proofs of mentioned works in Section1.2 rely on the

niteness of the set V through some nite invariant of the form f() =

v1

(2)

[XY[

, with

54 Chapter 3. A characterization of Behavioral Equivalence

G. It is clear that if J is a non-empty set then

j J, T

j

T = f (

jJ

T

j

()) f () [J[.

Since the left hand side has to be a non-negative integer, the minimal extensive form has to

be reached in a nite number of steps, which is upper bounded by [J[ f ().

3.3 Extension to chance moves

As Theorem 1 seems to be the mirror of the original work made by Thompson (1952) for the

equivalence relation = which is dened with respect to terminal paths :, it looks natural

that a similar result can be obtained as counterpart of the extended model with chance

moves given by Kohlberg and Mertens (1986). Apart from the intuition, some technicalities

have to be faced. To start with, a rather dierent notion of extensive game has to be

dened. Dierently from the tuple given in (2.7), an extensive game with chance moves and

imperfect information is described by a tuple of the form

V, _, I, p, (H

i

)

iI

, (

)

1

(1) , (

)

1

(1)

_

, (3.5)

such that (V, _) V

std

and the property of perfect recall given in (2.6) is satised. In

addition, the (unique) chance player veries

1

(1)

, p()

(A

,

) .

This collection of extensive games will be denoted with G

it is reasonable to assume the following rule:

Fundamental rule of decision trees. A chance node precedes a choice node in a

tree if and only if the uncertainty represented in the chance node resolves in the mind of the

decision maker prior to the time at which the choice must be made.

In a formal way, the fundamental rule of decision trees can be rewritten as

(H

i

H

i

, (h

, h

H

i

t

tt

)) =

_

a

,

A

,

, v

t

, v

tt

V [

,q(a,)

_

.

3.3. Extension to chance moves 55

for all ,

t

,

tt

1

(1)

and all i I . Notice that it is allowed also the case G

such

that I = , i.e. only the chance player is active at each non-terminal node 1

(1)

. The

property of perfect recall (2.6) has to hold for all players i I . For each extensive form

game with chance moves G

nf

:

() =

I , (S

i

)

iI\

, :,

_

,

where : S (:). Here represents the function from the set of strategies to the lotteries

of terminal paths induced by the sequence (

)

1

(1)

1

(1)

(A

,

). In other words, it

naturally generalizes Lemma 14. In a similar fashion, the normal form variants rnf

:

and

brnf

:

are dened, substituting the set of players I with I , and the map with .

9

Notice that if z = (

n

) : is a terminal path, then

n

has to be at most a countable

set, since it has been assumed (V, _) V

std

.

10

Therefore, according to Royden (2010), the

measure

z

=

n\Z

(0)

has to be a probability measure as well, and it is uniquely dened. It will be useful also to

dene the truncation at

t

n

by

z

[

n\Z

(0)

:

.

In few words, it just considers the product measure as if the terminal path z : has its root

at the truncated tree with vertex

t

n

1

(1)

. This notation is convenient to model the

case where only the chance player is active in some truncated tree

_

V [

,s

1

()

, _ [

,s

1

()

_

,

that is equivalent to I[

,s

1

()

= for some 1

(1)

. In such case, indeed, the situation can

be represented as if the chance plays instantaneously a random choice, to reach allowed

terminal paths. Then, a new probability measure

_

z:(V [

,s

1

()

,[

,s

1

()

)

d

z

[

belongs to

_

:

_

V [

,s

1

()

, _ [

,s

1

()

__

. Moreover, these measures are usually not dened for all non-

9

In a certain way, the function can be represented through isomorphism with a map whenever its

codomain is a subset of

det

(:) =

z

zZ

. Notice that is I is nite than the function cannot be

surjective. Suppose for the sake of contradiction that (S) = (:). Then [R[ [(:)[ = [(S)[ [1

(1)

[

|I|

.

This is impossible since (V, _) V

std

= [1

1

[ [N[, and in this case [R[ [1

(1)

[

|I|

[N[

|I|

= [N[.

10

For each terminal path z = (

n

) :, the set of vertices

n

belongs to V and the claim follows by

Lemma 3.

56 Chapter 3. A characterization of Behavioral Equivalence

terminal nodes. That is why it is necessary to dene 1

1(1) such that

11

1

= 1

(2)

:

t

s

1

() V

(1)

, I[

,s

1

(

)

=

1

(2)

:

t

s

1

() V

Z-n

, I[

,s

1

(

)

= .

To explain the intuition, the set 1

some immediate successors, every simultaneous moves games will be played only by up to

reach every allowed terminal paths and it is as near as possible to the well-dened set of

nite terminal nodes Z

(0)

V

Z-n

. The meaning of such denition will be clear in a few.

As before, the counterparts of sets as X

or Y

1

(1)

, N

= a

,

A

,

: (a

,

) = 0,

and

V

, M

= a

,

A

,

:

t

,

tt

q(a

,

),

.

In rough words, the set N

player at the non-terminal node 1

(1)

such that the probability that this random device

will choose one of those actions is exactly zero. Since that the basic trick of the forthcoming

result follows the same line of reasoning of the proof of Theorem 1, it is natural that it is

going to be used a transformation which deletes all such possible subsets. Moreover, the

subset M

represents the greatest subset of available actions of the chance player at the

non-terminal node 1

set, he will be always the unique active player until some terminal node will be reached and

the product probability measures are isomorphic to each other, to mean that the structures

of the probability measure over the allowed terminal paths are essentially the same.

12

Again,

it seems natural that it is needed a transformation which collects all this consecutive random

choices up to terminal nodes.

13

Let us prove a preliminary result about the properties of these probability measures on

11

Notice that I[

,s

1

()

= is equivalent to the proposition

is well-dened.

12

In particular the isomorphism

implies [supp

[ = [supp

13

Or better, from vertex 1

(2)

up to each terminal path (

n

) : such that

n

.

3.3. Extension to chance moves 57

this theoretical framework.

Lemma 23. For all games G

and vertices 1

(2)

, the probability measure

is

atomic, that is

1

(2)

, a

,

A

,

,

(a

,

) > 0.

Proof. By construction

,

). Suppose for the

sake of contradiction that

(a

,

) = 0 for all a

,

A

,

. Notice that the assumption

1

(2)

implies s

1

() 1

(1)

. Since G

(1)

is at most

countable. In particular also s

1

() has to be at most countable. It implies that

1 =

(A

,

) =

_

_

_

a,A,

a

,

_

_

=

a,A,

(a

,

) = 0,

which is a contradiction.

The assumption 1

(2)

is fundamental in the proof of Lemma 23. Indeed, it can be easily

proved that there exist games G

such that

(1)

. Finally,

everything is ready to dene the new transformations, and therefore to extend the result

provided by Kohlberg and Mertens (1986).

3.3.1 Deletion of Impossible Chance Moves

The domain of this transformation, which will be termed T

1

, is dened as

D

T

1

(G

) =

_

G

1

(1)

N

,=

_

.

Suppose that an extensive form game with chance moves , which is represented by

V, _, I, p, (H

i

)

iI

, (

)

1

(1) , (

)

1

(1)

_

, belongs to D

T

1

(G

0

1

(1)

such that N

0

is non-empty. The transformed extensive form game with chance

moves

T

1

() =

V

t

, _

t

, I

t

, p

t

, (H

t

i

)

iI

, (

t

)

1

(1) , (

t

)

1

(1)

_

is dened by:

58 Chapter 3. A characterization of Behavioral Equivalence

1. The tree (V, _) V

std

is modied such that the vertices which strictly follow

0

are

deleted, i.e.

V

t

= V V :

0

and _

t

=_ [

V

.

2. Everything else is kept xed.

In rough words, the Deletion of Impossible Chance Moves transformation deletes a set of

vertices which will be never reached whenever the game is played.

3.3.2 Coalescing Chance Moves

The domain of this transformation, which will be called T

2

, is dened as

D

T

2

(G

) =

_

G

M,=

_

.

Suppose that an extensive form game with chance moves , which is represented by

V, _, I, p, (H

i

)

iI

, (

)

1

(1) , (

)

1

(1)

_

, belongs to D

T

2

(G

0

1

(2)

such that M

0

is non-empty. The transformed extensive form game with chance

moves

T

2

() =

V

t

, _

t

, I

t

, p

t

, (H

t

i

)

iI

, (

t

)

1

(1) , (

t

)

1

(1)

_

is dened by the following algorithm, which has to be repeated for all a

,

0

M

0

A

,

0

:

1. The structure (V, _) V

std

is invariant except its the truncated tree

_

V [

0

,q(a,

0

)

, _ [

0

,q(a,

0

)

_

in the unique way such that

i p(

0

, A

t

i,

0

= A

i,

0

and

A

t

,

0

= (A

,

0

a

,

0

) A, with A

= :

_

V [

,s

1

(

)

, _ [

,s

1

(

)

_

,

t

q(a

,

0

).

2. Everything else is kept xed.

In rough words, the Coalescing Chance Moves transformation regroups the set of vertices

which will be player for sure only the chance player up to every allowed terminal node or

innite terminal path.

3.3. Extension to chance moves 59

3.3.3 The main result

In Section 3.1 the set of invariant transformations T has been dened as the set of

transformations which have a non-empty domain in G and such that the bnrf

:

is kept

invariant after each transformation, whenever it is applied. Similarly, here T

represents

the set of all invariant transformations with chance moves such that

T T

(D

T

(G

) ,= D

T

(G

) , brnf

:

()

= brnf

:

(T ())) .

Clearly, transformations in T

j

j0,1,2

do not belong to T

domains have to be extensive form games in the collection G, i.e. with a dierent structure

from the one considered here. Nevertheless, they can be naturally extended to this theoretical

framework in the unique way so that the strategic features of the chance player are kept

invariant after each transformation.

14

Let us call these extended transformations T

0

, T

1

and T

2

.

Theorem 2. The set of all invariant transformations with chance moves is given by

T

=

_

J,=

_

(

j

)

jJ

2

,1

,0

,1

,2

J

_

jJ

T

j

_

.

Proof. The proof will be on the same line of the one gives in Theorem 1. It looks clear that

by construction the Deletion of Impossible Chance Moves and the Coalescing Chance Moves

transformations essentially leave the :-best reduced normal form invariant. As in Remark

14, also their compositions do. Hence,

J,=

(

j

)

jJ

2

,1

,0

,1

,2

J

_

jJ

T

j

_

T

.

Suppose for the sake of contradiction that there exists an invariant transformation T such that

T T

J,=

(

j

)

jJ

2

,1

,0

,1

,2

J

_

jJ

T

j

_

. In particular, we must have D

T

(G

) ,=

and

D

T

(G

), brnf

:

()

= brnf

:

(T ()) .

Again, for all G

14

In particular, if an extended transformation is applied to a pair (i, ) / then i ,= .

60 Chapter 3. A characterization of Behavioral Equivalence

moves representation, let us say

in Lemma 20, noticing that each transformation can be applied at most once at each

non-terminal vertex, and they always apply jointly independently. On the one hand,

this minimal form is obtained only through sequences of transformations of the form

J,=

(

j

)

jJ

2

,1

,0

,1

,2

J

_

jJ

T

j

_

. On the other hand, the wanted contradiction is

given by

(G

)

= brnf

:

(G

) .

Dierently from Lemma 22, the existence of a bijection between these sets does not follow

exactly the same argument. Everything will be solved answering the following:

How to dene an injective map : brnf

:

(G

(G

)?

Suppose that a normal form brnf

:

() has been xed. Then it will be on the form

brnf

:

() =

I

t

, (S

i

)

iI

\

, :,

t

_

,

where S

i

= S

i

/ , I

t

= i I : [S

i

[ ,= 1 and

t

= proj

iI

\{}

S

i

. Let X be

the collection of all subsets X : such that

s, s

t

iI

\

S

i

, (

t

(s)) (X) = (

t

(s

t

)) (X). (3.6)

Obviously , : X. Moreover, suppose that (X

n

)

nN

X

N

. Then

nN

X

n

belongs to

X as well. It proves that X is a -algebra on the space of terminal paths :. As far as X

is the nest -algebra of : such that property (3.6) holds, then it is clear that the chance

player is active at vertex

r

(with at least two chance moves in supp

r

) if and only if

X ,= , :. Then, it is well-dened a probability measure

: X [0, 1],

X (

t

(s)) (X)

for some s

iI

\

S

i

. Thanks to Lemma 23, the probability measures

have to be

atomic for all 1

(2)

. It means that if 1

(2)

, there exists a set z

n

:, which is nite

3.3. Extension to chance moves 61

or at most countable,

15

such that

supp

= z

n

,

or equivalently (z

n

) = X (Royden, 2010). Since

all z z

n

by (3.6), we showed a way to construct the probability measure

r

. After

this identication, the set of active players without forced actions can be found with the

same method proposed in the proof of Lemma 22. At this point, p(

r

) and A

i,r

ip(r)

are uniquely dened. It is enough to repeat this algorithm for s

1

(

r

), and countable many

times for all non-terminal nodes 1

(1)

. Whenever a vertex Z

(1)

is reached, the

support of the probability measure

is uniquely dened on the -algebra X and this algorithm will not be repeated for terminal

nodes s

1

() Z

(0)

. The proof is complete.

Corollary. Let ,

t

G

such that each active player has no forced actions and every

chance moves has positive probability. Then they share the same :-reduced normal form

with chance moves if and only if they can be transformed into each other through a sequence

of Interchanging of Simultanoues Moves, Coalescing Moves and Coalescing of Chance Moves.

Proof. In other words, ,

t

G

are two extensive form games with chance moves such that

1

(1)

(1

(1)

)

(F

) = .

The claim can be rewritten as rnf

:

()

= rnf

:

(

t

) if and only if

T , T

t

J,=

(

j

)

jJ

2

,1

,2

J

_

jJ

T

j

_

, T ()

= T

t

(

t

).

According to our assumptions, the transformations T

0

and T

1

have no way to apply in

such games. It implies that rnf

:

() = brnf

:

() and rnf

:

(

t

) = brnf

:

(

t

), therefore the

minimal extensive form representations

() and

(

t

) are obtained necessarily through

some sequence of T

1

, T

2

and T

2

. The claim follows by Theorem 2.

15

Again, the index of the set is skipped to mean that both cases are possible.

CHAPTER 4

Invariance of Solution Concepts

The next stage is the investigation of solution concepts types which are preserved across

each one of the invariant transformations analyzed in Section 3.1, and generally the ones

provided in the original work of Thompson (1952). Given their importance, transformations

across which particular solution concepts are invariant are especially interesting. There is

no single property dening equivalence of games, but rather there are dierent amounts

of structure which can be included in the model, and correspondingly dierent equivalence

notions: e.g., temporal structure is not invariant across Thompsons transformations, and

neither any solution concept which depends upon the temporal order in which information

is revealed. Hence, this section addresses the questions posed by many authors, for example

Bonanno (1992b) or Hoshi and Isaac (2010).

At the same time, it can be easily realized how essential to the game theory perspective

the consequence functions are, together with the preference relations of each player. The

paramount game theoretic questions here are going to involve solution concepts, and so the

payo function will be relevant. Then let us consider games which can be represented by

the tuple

V, _, I, p, (H

i

)

iI

, (

)

1

(1) , (u

i

)

iI

(4.1)

such that V, _, I, p, (H

i

)

iI

, (

)

1

(1) G, so that in particular (V, _) V

std

and perfect

4.1. Renements of equilibrium concepts 63

recall (2.6) holds. Here u

i

:

iI

S

i

R represents the utility function of player i I. It

will be useful to dene also its extended form, i.e.

i I, U

i

: (S) R,

_

sS

u

i

(s) d(s).

Throughout this Chapter, it will be assumed that the set of players is nite or at most

countable. Moreover, a kind of abuse of notation is going to be made, to ease the notation.

The collection of games of the form is still called G. Similarly, the set of invariant

transformation T is still denoted with T, and T

1

, T

2

, T

3

, T

4

represent respectively the four

Thompsons transformation: Interchanging of Simultaneous Moves, Coalescing Moves /

Sequential Agent Splitting, Addition of a Superuous Move and Ination / Deation.

4.1 Renements of equilibrium concepts

The most basic equilibrium concept was dened by Nash (1951). It assumes that each player

has correct beliefs about the prole of strategies of their opponents, and obviously that there

is no incentive to deviate from their own equilibrium strategy.

Denition 17. For all games G, dene A

Nash

() the set of Nash equilibrium proles,

that is

A

Nash

() =

_

s

iI

S

i

: i I, s

i

S

i

, u

i

(s

i

, s

i

) u

i

(s

i

, s

i

)

_

.

Lemma 24. The set of Nash equilibrium is invariant to each one of the four Thompsons

transformations:

T T, D

T

(G), A

Nash

() = A

Nash

(T ()) .

Proof. According to Thompsons result, there exists a non-empty set J such that T =

(

j

)

jJ

1,2,3,4

J T

j

. Hence it is enough to prove that

j 1, 2, 3, 4, D

T

j

(G), A

Nash

() = A

Nash

_

T

j

()

_

.

By denition of invariance transformation, each one of them leave the reduced normal form

64 Chapter 4. Invariance of Solution Concepts

unchanged. It means that

1

j 1, 2, 3, 4, D

T

j

(G), rnf ()

= rnf

_

T

j

()

_

.

On the one hand. according to Denition 17, the Nash equilibrium is dened on the normal

form representation of the game. On the other hand, the reduced normal form simply deletes

equally preferable strategies by construction. The claim follows.

After its introduction, it was attacked from dierent sides against its too permissive

character. For example, it does not take into account the possibility of events where players

fail to act rationally. Hence, Myerson (1978) proposed a renement with the following.

2

Denition 18. A prole (

iI

(S

i

) is dened -proper equilibium if

i I, s

i

, s

t

i

S

i

, supp

i

= S

i

U

i

_

s

i

i

_

> U

i

_

i

_

=

i

(s

i

)

i

(s

t

i

) .

Let A

Proper

() be the set of proper equilibrium, i.e. the set of all

iI

(S

i

) such that

there exists a sequence of (

which converges to

.

Lemma 25. The set of proper equilibrium is invariant to each one of the four Thompsons

transformations:

T T, D

T

(G), A

Proper

() = A

Proper

(T ()) .

Proof. Following the same line of reasoning of the proof of Lemma 24, it is enough to prove

that

j 1, 2, 3, 4, D

T

j

(G), A

Proper

() = A

Proper

_

T

j

()

_

.

A proper equilibrium needs to be the limit point of some sequence of -proper equilibrium.

By assumption each one of them has to be fully mixed. At this point a new sequence of

-proper equilibrium can be obtained in the reduced normal form, simply assigning the sum

of probabilities of equivalent strategies to its representative element, and it will converge to

the same limit point. The proof is complete.

1

There is no subscript because the it is going to be used the (standard) reduced normal form, which is

not dened with respect to terminal paths (or terminal nodes, in the case of games with nite V ).

2

The notion of proper equilibrium renes in turn the one of Trembling Hand Perfection provided by

Selten (1975).

4.1. Renements of equilibrium concepts 65

4.1.1 Subgame Perfect Equilibrium

Consider the extensive form game represented in Figure 4.1. According to Denition 17,

the set of Nash equilibrium is given by A

Nash

() = (y, a), (x, b).

A

1, 1

B

2, 2 0, 0

x y

a

b

Figure 4.1: A Nash equilibrium which is not reasonable.

The equilibrium (x, b) clearly highlights the ineptitude of this concept to represent situations

of erring players: suppose that the equilibrium of the game prescribes (x, b), and player A

deviated for some reason. The equilibrium (x, b) still requires player B to play b, which is

clearly not his optimal choice. The problem relies on the fact a strategy is thought to be a

kind of prescription to a player on what to do at all possible information sets: Since in a non-

cooperative game binding agreements are not possible, the solution of such a game has to be

self-enforcing (van Damme, 1983, Preface). Indeed, the Nash equilibrium and the Myersons

Proper equilibrium are essentially dened on the normal form representations. Therefore,

the notion of Subgame Perfect Equilibrium proposed by Selten (1965) mirrors the one of

Nash equilibrium for dynamic games. It relies on the concept of subgame, i.e. every part

of extensive form game which is constructed on the truncated tree

_

V [

,s

1

()

, _ [

,s

1

()

_

for

some 1

(1)

such that it is closed under the information sets and

i p(), H

i

H

i

, h

= H

i

,

meaning that the histories associated with the root are the only members of that nodes

information sets. Denote with / the set of all possibile subgames. Clearly, if G has

perfect information, then every non-terminal node 1

(1)

generates a subgame. Conversely,

it can be the case that the game itself is the unique subgame: for example, the game

66 Chapter 4. Invariance of Solution Concepts

represented in the Figure below.

3

A

B B

1, 0 1, 1 1, 2 2, 3

x y

a

b

a

b

Figure 4.2: The unique subgame is the game itself.

Denition 19. For all games G, dene A

Spe

() the set of Subgame perfect equilibrium

proles, that is

A

Spe

() =

_

s

iI

S

i

: i I, s

i

S

i

, K /, u

i

(s

i

[

K

, s

i

[

K

) u

i

(s

i

, s

i

[

K

)

_

.

In few words, it states that s

equilibrium in every subgame. It clearly renes the notion of Nash equilibrium. Indeed, in

the case of the game represented in Figure 4.1:

A

Spe

() = (y, a) (y, a), (x, b) = A

Nash

().

Nevertheless, there exist situations of games with imperfect information where selected

Subgame Perfect equilibrium may be unreasonable. Take for example for case of Figure

4.3. It can be easily checked that

A

Spe

() = A

Nash

() = (x, a), (z, b).

3

Notice that if a game G satises perfect recall (2.6) then the game itself is always a subgame.

4.1. Renements of equilibrium concepts 67

A

B B

2, 4

3, 3 0, 2 4, 3 1, 1

x

y z

a

b

a

b

Figure 4.3: A Subgame Perfect equilibrium which is not reasonable.

Again, the Subgame Perfect equilibrium (z, b) highlights the ineptitude of this concept to rule

out situations of erring players. One may conclude that the notion of subgame is too strict,

and a dierent equilibrium concept is needed. The most natural way is to assume that each

player has to guess what is the correct history (as ordered sequence of simultaneous moves

games) which brings him to be active, i.e. whenever he has to choose in some non-singleton

information set. Then, according to such guess, he will dene some probabilities measures on

the set of his available actions. This underlying idea was put forward by Kreps and Wilson

(1982) as the notion of Sequential equilibrium. Hence, the new equilibrium requires also

the specication of some system of beliefs, together with a prole of behavioral strategies:

Such pair has been dened assessment. The additional requirements to be an equilibrium

rely on the concept of consistency

4

and the sequential rationality of each player. It turns

out that the notion of Sequential equilibrium aims to regroup the ones of trembling hand

and subgame perfection. In particular, it implies that if it can be shown that the set of

Sequential equilibria is not preserved through some of the Thompsons transformations then

also the set of Subgame Perfect equilibria will not. The converse may be not true in general.

5

Lemma 26. The set of Subgame Perfect equilibria is preserved through Interchanging of

Simultaneous Moves transformation:

D

T

1

(G), A

Spe

() = A

Spe

(T

1

()) .

4

The term consistency can be considered misleading, as far as it asks for the existence of a sequence of

totally mixed assessments converging to the original one, such that the Bayes rule holds whenever possible.

5

Nevertheless, it can be shown that, according to the denition of Sequential equilibrium given in Kreps

and Wilson (1982), also the converse holds. Indeed the unique transformation under which the set of Subgame

Perfect equilibria is always preserved is the Interchange of Simultaneous Moves T

1

. The same holds for the

set of Sequential equilibria.

68 Chapter 4. Invariance of Solution Concepts

Proof. A prole of strategies s

equilibrium for all subgames K /. But the condition to be a subgame is the closeness

under the information set partitions, i.e. it cannot exists a information set which has histories

in the subgame and outside. Since T

1

does not change the structure of the information set

partitions (H

i

)

iI

(dierently from Coalescing Moves transformation), and everything else is

essentially kept xed, the proof concludes with the same argument of Lemma 24.

It will be shown now that T

1

is the unique transformation under which the set A

Spe

()

is preserved.

Lemma 27. The set of Subgame Perfect equilibrium is generally not preserved through

Coalescing Moves / Sequential Agent Splitting transformation:

D

T

2

(G), A

Spe

() ,= A

Spe

(T

2

()) .

Proof. It is enough to provide an example, which is shown in Figure 4.4.

A

A

B B

2, 1

0, 0 1, 2 0, 1 0, 2

x y

a

b

a

b

t z

=

A

B B

2, 1

0, 0 1, 2 0, 1 0, 2

x

y z

a

b

a

b

Figure 4.4: Coalescing Moves transformation does not preserve Subgame Perfect equilibria.

According to Denition 19, the set of Subgame Perfect equilibria is not invariant, indeed it

can be easily check that:

A

Spe

() = (z, b), (y, b) (z, a), (z, b), (y, b) = A

Spe

(T

2

()) .

In particular, recalling the construction of the transformation T

2

, it should be clear that also

4.1. Renements of equilibrium concepts 69

the following holds:

D

T

2

(G), A

Spe

() A

Spe

(T

2

()) .

Lemma 28. The set of Subgame Perfect equilibrium is generally not preserved through

Addition of Superuous transformation:

D

T

3

(G), A

Spe

() ,= A

Spe

(T

3

()) .

Proof. Again, it is enough to provide an example, which is shown in Figure 4.5.

A

1, 4

B

0, 2 2, 3

x y

a

b

=

A

B B

0, 2 2, 3 1, 4 1, 4

x y

a

b

a

b

Figure 4.5: Addition of Superuous Move does not preserve Subgame Perfect equilibria.

In a sense, the Addition of Superuous Moves transformation modies the structure of the

game so that it looks more similar to extensive form representation of its reduced normal

form. In particular, it means that the number of subgames shrinks, so that

D

T

3

(G), A

Spe

() A

Spe

(T

3

()) .

Moreover the inclusion can be strict. Indeed it is straightforward to check that in the above

example

A

Spe

() = (y, b) (x, a), (y, b) = A

Spe

(T

3

()) .

Lemma 29. The set of Subgame Perfect equilibrium is generally not preserved through

Ination / Deation:

D

T

4

(G), A

Spe

() ,= A

Spe

(T

4

()) .

70 Chapter 4. Invariance of Solution Concepts

Proof. Let us check the extensive form D

T

4

(G) represented in Figure 4.6.

A

B B

0, 2 2, 3 1, 4 1, 4

x y

a

=

A

B B

0, 2 2, 3 1, 4 1, 4

x y

a

b

a

b

Figure 4.6: Ination/Deation transformation does not preserve Subgame Perfect equilibria.

It can easily concluded that A

Spe

() = (y, a) (x, b), (y, a) = A

Spe

(T

4

()), and in

general

D

T

4

(G), A

Spe

() A

Spe

(T

4

()) .

Theorem 3. The set of invariant transformations which preserve always the set of Subgame

Perfect equilibria coincides with the set of compositions of Interchanging of Simultaneous

Moves and Deletion of Forced Moves:

T T: D

T

(G), A

Spe

() = A

Spe

(T ()) =

_

J,=

_

(

j

)

jJ

0,1

J T

j

_

.

Proof. In the same spirit of Theorems 1 and 2, the result provided by Thompson (1952) can

be extended in this theoretical framework by

T =

_

J,=

_

(

j

)

jJ

0,1,2,3,4

J

_

jJ

T

j

_

.

The transformation T

0

is clearly innocuous in any case.

6

On the one hand, according to

Lemma 26, the transformation T

0

preserves the set of Subgame Perfect equilibria, implying

6

As observed before, it is rather a technicality which can be avoided assuming [A

i,

[ 2 whenever

(i, ) /.

4.1. Renements of equilibrium concepts 71

that

_

J,=

_

(

j

)

jJ

0,1

J T

j

_

T T: D

T

(G), A

Spe

() = A

Spe

(T ()) .

Suppose that there exists an invariant transformation T =

(

j

)

jJ

0,1

J T

j

, for some non-

empty J, which belongs to the right hand side and such that

j

jJ

2, 3, 4 ,= . Then,

according to examples provided in Lemmas 27, 28 and 29, it can be shown that there exists

D

T

(G) such that A

Spe

() ,= A

Spe

(T ()).

4.1.2 Weak Perfect Bayesian Equilibrium

At this point, one may argue that all types of equilibrium are invariant to the Interchanging

of Simultaneous Moves transformation. It is wrong. One example is given by the so-called

7

Weak Sequential equilibrium proposed by Myerson (1991, Ch.5): it can be shown it is

invariant to Coalescing Moves transformation, but not to Interchanging to Simultaneous

Moves. Another example is given by the notion of Perfect Bayesian Equilibrium.

8

In the

denition given by Fudenberg and Tirole (1991), this equilibrium is not invariant with respect

to both transformations, Interchanging of Simultaneous Moves and Coalescing Moves. On

the one hand, since the Sequential equilibrium is a renement, it is not surprising that (all

variants of) Perfect Bayesian Equilibrium are not preserved through Coalescing Moves. On

the other hand, some years later Battigalli (1996a) proved that their notion of equilibrium

is not invariant also to the Interchanging of Simultaneous Moves transformation. Then, he

suggested a renement, which in turn is not equivalent to Sequential equilibrium, such that

the property of invariance with respect to T

1

holds. Let us replicate his example,

9

considering

the notion of Weak Perfect Bayesian Equilibrium proposed by Mas-Colell et al. (1995, p.285).

Denition 20. A prole of strategies and a system of beliefs (, ) is a Weak Perfect

Bayesian Equilibrium if:

1. The strategy prole is sequentially rational given the belief system ;

2. The system of beliefs is derived from the strategy prole through Bayes rule

7

Despite its name, it is not a renement of the Subgame Perfect equilibrium proposed by Selten (1965).

8

In literature there does not exist a unique denition of this equilibrium.

9

A similar example shows the drawback of non-invariance for other notions of this equilibrium, e.g. the

one provided by Bonanno (1992a).

72 Chapter 4. Invariance of Solution Concepts

whenever possibile, meaning that

h H H , Pr (H[) > 0 = (x) =

Pr (h[)

Pr (H[)

.

Figures 4.7 and 4.8 represent two equivalent extensive forms

10

with three players A, B

and C such that it begins with a simultaneous moves game between A and B. If B chooses

the action o the game ends (indeed, there are two terminal nodes associated with this action,

z

0

and z

13

, depending on the choice of A). Otherwise player C will have to choose between

a, b and c, under the assumption that he can observe the initial choice of A, but not the one

of B (or better, he can only infer that B did not choose the action o).

B

C C

z

4

z

6

z

5

z

1

z

2

z

3

x y

a c a c

b b

B

C C

z

10

z

12

z

11

z

7

z

8

z

9

x y

a c a c

b b

A

z

0

z

13

o o

Figure 4.7: T

1

does not preserve the set of Weak Perfect Bayesian equilibria.

The utilities associated with terminal nodes are u(z

0

) = (1, 1, 0) and u(z

13

) = (0, 0, 0) if B

chooses o. Otherwise, for all j 1, . . . , 6 let u(z

j

) = u(z

j+6

), and

j 1 2 3 4 5 6

u(z

j

) (0, 0, 3) (0, 0, 0) (0, 0, 2) (0, 0, 0) (0, 0, 3) (0, 0, 2)

10

It is understood that equivalent means that they share the same (reduced) normal form, hence without

considering the temporal order of moves: it will be the point of the example.

4.2. Rationalizability in extensive form games 73

B

A A A

z

0

z

13

C

z

7

z

8

z

9

a

b

c

C

z

10

z

11

z

12

a

b

c

C

z

1

z

2

z

3

a

b

c

C

z

4

z

5

z

6

a

b

c

x y o

Figure 4.8: T

1

transformation of the game in Figure 4.7.

On the one hand, it can be checked that the assessment (, ) where = (, o, (a if ; b if ))

is a Weak Perfect Bayesian equilibrium whenever the probability assigned by C at the

histories (, x) and (, y) are both not smaller than 2/3. In this way, the condition of

sequentially rational if veried for player C (there is nothing else to check, since A and B

play only once). On the other hand, such pair is not a Weak Perfect Bayesian equilibrium in

the transformed game of Figure 4.8: Interchanging of Simultaneous Moves does not preserve

the set of Weak Perfect Bayesian equilibria; at least, according to the denition given by

Mas-Colell et al. (1995).

4.2 Rationalizability in extensive form games

Since the extensive form representation is richer than its associated normal form in terms of

information, and the active players are allowed to update their subjective beliefs as the game

unfolds, the study of rationalizability becomes more complex than the one in simultaneous

moves game. Extensive form rationalizability, introduced by Pearce (1984), is a solution

concept which relies on the forward induction reasoning: it tries to grab the implications of

rationality and common certainty in rationality. It is dened, as in the case of simultaneous

moves games, as an algorithmic procedure of elimination of strategies. The underlying idea

74 Chapter 4. Invariance of Solution Concepts

is that each active player can make an argument about how he can best rationalize their

opponents behavior, and what can be deduced from this line of reasoning about what their

opponent will do. The assumption is that when a player knows that his opponents behaved

rationally, then (he believes) they will continue to act rationally in the future. Moreover,

if he observes that their opponents behavior can be rationalized assuming that each one of

them believed their opponents to behave rationally, he assumes that they will continue to do

also in the future. And so on.

Predicted outcomes are characterized epistemically by Battigalli and Siniscalchi (1999)

and Battigalli and Siniscalchi (2002) as those attained under rationality and common

strong belief in rationality: along each path of the game, at the rst occasion a player

has the occasion to play, he believes that his opponents will behave rationally, and that

their opponents believe their opponents to behave rationally, and so forth. This notion

incorporates a notion of best rationalization principle, in the sense that, in case of

unexpected situations, players will be so optimistic to assign to highest possible degree of

strategic sophistication to the other ones. In the opposite case, it is reasonable to assume

that they will not revise their beliefs.

Let us make an example: consider the extensive form game represented in Figure 4.9. In

this perfect-information game the action a

1

is strictly dominant for player A, and action c

1

is strictly dominant for player C.

A

(5, 0, 0)

B

(0, 1, 0)

C

(3, 0, 3) (4, 2, 2)

a

1

a

2

b

1

b

2

c

1

c

2

Figure 4.9: How can player B be justied to choose b

2

?

At the beginning of the game, player B assumes that his opponents are sequentially rational,

4.2. Rationalizability in extensive form games 75

or better:

i I, (j I i, i believes that j is sequentially rational) . (4.2)

Hence, he is expecting that the game will not unfold to his decision node. What happens in

the opposite case? He can only deduce that his assumption was not correct, meaning that

it is not true that every opponent (viewed as a group) is sequentially rational. In particular,

he infers that C can choose his strictly dominated action c

2

. In this sense, player B might

be justied to choose action b

2

. This is the line of reasoning underlying the Correlated

Extensive Form Rationalizability. The situation will be clearly dierent if the assumption

(4.2) is replaced with

i I, j I i, (i believes that j is sequentially rational) .

In other words, stochastic independence among players beliefs allows to narrow down the

set of possible outcomes. In particular, in the case B has to choose, the assumption about

the rationality of C is not violated. Under this constraint, the number of possible outcomes

shrinks to two. This example highlights the dierence between the notion of Weak Extensive

Form Rationalizability and the Correlated EFR; see also (Ben Porath, 1997), (Battigalli,

1996b) and (Battigalli, 1997). The insight is that, as pointed out by Stalnaker (1996), causal

independence does not entail epistemic independence.

Let us characterize these dierent notions of Extensive Form Rationalizability, with the

convention that a player strongly believes an event E if he assigns probability 1 to E on any

information set which is not inconsistent with the event itself. The Correlated Extensive

Form Rationalizability is based on the following axioms, for all players i I:

E

0

(i): j I, j is (weakly) sequentially rational.

n N, E

n+1

(i): j I, j strongly believes E

0

(i) . . . E

n

(i).

It is then assumed that each player assigns the highest possible degree of strategic

sophistication to the other ones viewed as the group of opponents. Then, it is implicit

that each player entertains the hypothesis that his opponents might be coordinating their

strategies. As the game unfolds, a player i may realize that the event E

n

(i) is not true; in

76 Chapter 4. Invariance of Solution Concepts

such case he will assign probability 1 to

E

0

(i) . . . E

n1

(i).

The notion of Weak Extensive Form Rationalizability

11

relies on the following ones:

W

0

(i): j I, j is (weakly) sequentially rational and has independent beliefs.

n N, W

n+1

(i): j I, j is certain of W

n

(i) at the beginning of the game.

In particular, i assigns to each of their opponents the smallest degree of strategic

sophistication among them: their opponents are viewed as a group.

The assumption of epistemic independence can be then complemented with an additional

restriction on belief revision, so that each player will assign the maximal degree of

sophistication to each one of his opponents. Hence, a further renement has been proposed,

called Strong Extensive Form Rationalizability. This last notion is based on the

following axioms, for all players i I:

j I, S

0,j

(i): j is (weakly) sequentially rational and has independent beliefs.

j I, n N, S

n+1

(i): k I j, j strongly believes S

0,k

(j) . . . S

n,k

(j).

At this point, one can simply realize that the set of prole of strategies which survive

the algorithmic procedure of eliminations is preserved through Interchanging of Simultaneous

Moves and Coalescing Moves transformations, with respect to each version of Extensive Form

Rationalizability. For all games G dene E

Corr

() the set of prole of strategies which

are selected from the Correlated Extensive Form Rationalizability, and similarly E

Weak

()

and E

Strong

(), so that

G, E

Strong

() E

Weak

() E

Corr

().

11

Weak Extensive Form Razionalizability is sometimes called Initial Extensive Form Rationalizability.

The reason should be clear from the denition of axioms W

1

(i), W

2

(i), . . ..

4.2. Rationalizability in extensive form games 77

Theorem 4. Interchanging of Simultaneous Moves and Coalescing Moves transformations

preserve the set of rationalizable proles in extensive games with imperfect information, i.e.

j 1, 2, D

T

j

(G), E

Corr

() = E

Corr

(T

j

()),

and similarly for E

Weak

() and E

Strong

().

Proof. The transformation T

1

essentially preserves the information sets partitions (H

i

)

iI

.

It implies that, as the transformed game unfolds, each player does not have a better

information structure than in the original game: the validity of axioms is preserved across this

transformation. In particular, a prole of strategy will be eliminated from the transformed

game T

1

() if and only if it will on the game as well.

B

C C

z

3

z

4

z

1

z

2

b

1

b

2

c

1

c

2

c

1

c

2

B

C C

z

7

z

8

z

5

z

6

b

1

b

2

c

1

c

2

c

1

c

2

A

a

1

a

2

=

A,C

B

B

z

2

z

4

z

1

z

3

b

1

b

2

b

1

b

2

B

B

z

6

z

8

z

5

z

7

b

1

b

2

b

1

b

2

a

1

.c

1

a

1

.c

2

a

2

.c

1

a

2

.c

2

Figure 4.10: Interchanging of Simultaneous Moves transformation.

78 Chapter 4. Invariance of Solution Concepts

Take as example the transformation represented in Figure 4.10. Player C is not able to

observe the action chosen by his opponents. Also, player B can observe the choice of A.

After the application of transformation T

1

player C is playing at the root of the tree, together

with A. It is clear from the Denition of this invariant transformation, given in Subsection

3.1.2, that B has always the same amount of available information as the game unfolds: he

can still observe only the action chosen by A.

The same argument cannot be used with the transformation T

2

: the structure of

information sets partitions (H

i

)

iI

is not preserved across the transformation. Nevertheless,

also in this case the information received by each player is essentially the same. Indeed,

according to the construction of this transformation, given in Subsection 3.1.3, the

information sets partitions are modied in a way that, if some actions of a player i are

moved up in the tree, his opponents (in particular, the ones active in the middle part of the

tree) can infer nothing more and nothing less after this transformation.

A

B

A A

z

5

z

3

z

4

z

1

z

2

a

b

x y x y

w z

=

A

B B

z

5

z

2

z

4

z

1

z

3

x

y z

a

b

a

b

Figure 4.11: Coalescing Moves transformation.

Take as example the transformation represented in Figure 4.11. In the transformed game,

player A has a bigger set of available actions. Clearly, for A both games represent essentially

the same situation, as far in both case he will observe nothing about his opponent. Moreover,

in the original game player B is able to distinguish only between z and w (or better, if the

game unfolds up to his decision node then he can infer that action z has not been chosen by

A). In the transformed game, if the game unfolds up to one of his decision nodes, he will

deduce only that z has not been chosen. As it was expected, the information structure is

essentially preserved through the transformation.

CHAPTER 5

Closing Remarks

In game theory, there is place for many notions of equivalence. From this perspective, the

four transformations provided by Thompson (1952) can be considered the starting point of

the development of many other equivalence relations. Although the focus is still related

to the descriptive component of the rules of the game, the theoretical framework that has

been analyzed here does not need the specication of the consequence function. It has

been shown that (the compositions of) only two of those transformations are sucient to

completely characterize the behavioral equivalence dened by having essentially the same

normal forms, in the sense that it happens if and only if one can be transformed into each

other by some applications of Interchanging of Simultaneous Moves and Coalescing Moves

/ Sequential Agent Splitting. It is remarkable that each transformation preserves perfect

recall, and so their compositions. Here, the results hold in a theoretical framework which

is more general than the set-theoretic extensive form dened by Bonanno (1992b): each

proof does not rely on the niteness of sets. Moreover, it is suggested a natural way to extend

the results provided by Kohlberg and Mertens (1986) for the model with chance moves.

Then, various solution concepts have been surveyed to evaluate which ones are preserved

under these transformations, and which ones not: the original Thompsons characterization

shows that the reduced normal form is the most natural notion of game equivalence.

80 Chapter 5. Closing Remarks

Nevertheless, many known solution concepts are not invariant under these transformations:

one may argue that this stable characterization can be used to provide a sort of goodness

for solution concepts. For the purpose, one could use a kind of weighted measure over the

types of transformations, where the invariance with respect to Interchanging of Simultaneous

Moves and Coalescing Move should be considered at least as important as the other two ones,

according to the results of this work. The answer is negative: it depends only on the strategic

features one wants to preserve across transformations.

Many natural questions related to this theme arise, and perhaps it can be interesting to

nd them an answer. Some examples: Does a similar result hold for extensive form games

with perfect recall, which are constructed on a tree structure such that

(V, _) V V

std

?

In this case the minimal extensive form representation is still uniquely well-dened.

1

But

how to construct a injective map from the set of (some variant of) normal forms to the one

of minimal extensive forms? In case of negative answer, how to construct a counterexample?

In addition: Is it possible to organize to notions of equivalence into a kind of hierarchy,

according to increasingly strict transformations which preserve the game structures?

At this point, one may ask what is the additional value to a well-dened notion of

quotient space with respect to some equivalence relation by the explicit specication of

all transformations under which it remains invariant. On the one hand, the rst answer

could be precision. Transformations on extensive games can give us insight into the nature

of strategic structure, to make explicit the logical equivalence of transformation rules. On

the other hand, another answer could be transparency. For example, topological structure

remains invariant under arbitrary stretching of the plane, rotations, and translations. In

geometry, similarity is invariant under dilations, translations and rotations; congruence is

invariant to all of them, except the former. These various equivalence relations become more

transparent stated in terms of permissible transformations, making in some sense explicit the

meaning of the quotient space and allowing a deeper understanding of game equivalences.

1

Indeed the proof of Lemma 20 does not make use the assumption (V, _) V

std

.

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