Local Dominance

TL;DR

The paper introduces local dominance, a new concept in dynamic games where players compare actions based on immediate outcomes and a limited view of the future, enabling the implementation of social choice functions beyond traditional methods.

Contribution

It defines local dominance in dynamic games and demonstrates its ability to implement social choice functions that are not achievable with obvious dominance strategies.

Findings

Local dominance provides a new solution concept for dynamic games.

It enables implementation of social choice functions beyond traditional strategies.

The approach handles players with limited foresight and no forward planning.

Abstract

We define notions of dominance between two actions in a dynamic game. Local dominance considers players who have a blurred view of the future and compare the two actions by first focusing on the outcomes that may realize at the current stage. When considering the possibility that the game may continue, they can only check that the local comparison is not overturned under the assumption of "continuing in the same way" after the two actions (in a newly defined sense). Despite the lack of forward planning, local dominance solves dynamic mechanisms that were found easy to play and implements social choice functions that cannot be implemented in obviously-dominant strategies.