On the notion of perfect Bayesian equilibrium

Abstract

Often, perfect Bayesian equilibrium is loosely defined by stating that players should be sequentially rational given some beliefs in which Bayes rule is applied “whenever possible.” We argue that there are situations in which it is not clear what “whenever possible” means. Then we provide an elementary definition of perfect Bayesian equilibrium for general extensive games that refines both weak perfect Bayesian equilibrium and subgame perfect equilibrium.