The logic of backward induction

Abstract

Call a perfect information (PI) game simple if each player moves just once. Call a player rational if he never takes an action while believing, with probability 1, that a different action would yield him a higher payoff. Using syntactic logic, we show that an outcome of a simple PI game is consistent with common strong belief of rationality iff it is a backward induction outcome. The result also applies to general PI games in which a player's agents act independently, rendering forward inferences invalid.