Limited Horizon Forecast in Repeated Alternate Games

Abstract In two-player infinite-horizon alternating-move games, a limited forecast ( n 1 , n 2 )-equilibrium is such that (1) player i chooses actions according to his n i -length forecasts so as to maximise the average payoff over the forthcoming n i periods, and (2) players′ equilibrium forecasts are correct. With finite action spaces, ( n 1 , n 2 )-solutions always exist and are cyclical, and the memory capacity of the players has no influence on the set of solutions. A solution is hyperstable if it is an ( n 1 , n 2 )-solution for all n 1 , n 2 sufficiently large. Hyperstable solutions are shown to exist and are characterized for generic repeated alternate-move 2×2 games. Journal of Economic Literature Classification Numbers: C72, D81.