In dynamic games, players may observe a deviation from a non-binding agreement that may be incomplete before the end of the game. Trying to rationalize the deviation can cause players to revise their beliefs about the behavior of the diverter in the pursuit of the game. This case of advanced induction reasoning is based on interactive beliefs not only about rationality, but also about adherence to the agreement itself. I examine the impact of such rationalization on the self-applicability of the agreement. Accordingly, the results of the Game will be deemed enforceable by agreement or not. The conclusions differ considerably from what traditional refinements of balance suggest. A perfect equilibrium result without subplay can be induced by a self-imposing chord, while a perfect equilibrium result of the subplay cannot. The incompleteness of the agreement can be crucial for the implementation of an outcome. Emiliano Catonini, Self-enforcing Agreements and Forward Induction Reasoning, The Review of Economic Studies, Volume 88, Issue 2, March 2021, Pages 610-642, doi.org/10.1093/restud/rdaa051 Most users must log in with their email address.
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