Backward induction versus forward induction reasoning (Q2344936)

Summary: We want to shed some light on what we mean by backward induction and forward induction reasoning in dynamic games. To that purpose, we take the concepts of common belief in future rationality [the author, Games Econ. Behav. 83, 231--254 (2014; Zbl 1284.91056)] and extensive form rationalizability [\textit{D. G. Pearce}, Econometrica 52, 1029--1050 (1984; Zbl 0552.90097); \textit{P. Battigalli}, J. Econ. Theory 74, No. 1, 40--61 (1997; Zbl 0887.90185); \textit{P. Battigalli} and \textit{M. Siniscalchi}, ibid. 106, No. 2, 356--391 (2002; Zbl 1038.91013)] as possible representatives for backward induction and forward induction reasoning. We compare both concepts on a conceptual, epistemic and an algorithm level, thereby highlighting some of the crucial differences between backward and forward induction reasoning in dynamic games.