Forward induction
Working out what a player must have been aiming at from a move they have already made, rather than only reasoning backwards from the end.
Often misread asTaking it as a rival method to backward induction, so the two get applied as alternatives, when forward induction is a restriction on off path beliefs used alongside backward reasoning rather than instead of it.
How to see it
What must they have been aiming at to have done that
Backward reasoning asks what a player will do next. Forward reasoning asks what a player must have been expecting when they did what they have already done. If a move only makes sense for somebody chasing a particular outcome, then having seen the move you should credit them with chasing it.
The checkThey answer different questions. Forward induction says what to believe after a surprise; backward induction says what to do once you believe it.
Try itA player turns down a safe nine pounds to enter a game whose best outcome for them pays ten and whose other outcome pays five. Ask what you should now believe they are playing for. If you answer that they intend to reach the ten, you have run the argument.
Know these first
Leads on to
Easily confused with
Sources
- Kohlberg, E. & Mertens, J.-F. (1986). Econometrica 54(5), 1003-1037.
- Fudenberg, D. & Tirole, J. (1991). MIT Press.
- Osborne, M. & Rubinstein, A. (1994). MIT Press.