Abstract
Given a dynamic game with ordinal preferences, we deem a strategy sequentially rational if there exist a von Neumann-Morgenstern utility function that agrees with the assumed ordinal preferences and a conditional probability system with respect to which the strategy is a maximizer. We prove that this notion of sequential rationality is characterized by a notion of dominance, called Conditional B-Dominance, that extends Pure Strategy Dominance of Borgers (1993) to dynamic games represented in their extensive form. Additionally, we introduce an iterative procedure based on Conditional B-Dominance with a forward induction reasoning flavour, called Iterative Forward B-Dominance, that we prove satisfies nonemptiness. Finally, we show that Iterative Forward B-Dominance selects the unique backward induction outcome in generic dynamic games with perfect information.
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