Viable Nash Equilibria: Formation and Sustainability
Viable Nash equilibria are observed in functioning social systems and lab experiments, whereas unviable Nash equilibria are contrived and have the appearance of useless theory.
I study simple dual indices to assess equilibrium viability.
Surprisingly, despite their simplicity these indices:
(1) uncover new equilibrium properties and stability considerations that escape standard game theory refinements, and
(2) provide insights into the viability of Nash equilibria in functioning social system and in laboratory experiments.