Local perfection (Q1098788)

We investigate solution concepts for normal-form games with large strategy spaces. ``Trembling hand'' perfection (THP) is extended to games with compact metric strategy sets. A Nash equilibrium is THP if it is the limit of equilibria in which agents face vanishingly small uncertainty. We refine THP by imposing some structure on the kind of uncertainty that agents face: a THP equilibrium is locally perfect if the uncertainty is ``predominantly local'' in nature, i.e., if agents' probability assessments assign, in the limit, an overwhelmingly large proportion of the total probability mass to events ``in the vicinity of the truth.''.