What is the Trembling Hand Perfect Equilibrium?

The trembling hand perfect equilibrium, as defined in game theory, is a situation or state that takes into consideration the possibility of an unintended move by a player by mistake. The probability of this type of play occurring is very small, and the decision on using this concept in such a case could be inconclusive. This concept was gotten from a refinement of the Nash equilibrium which was created by German economist Rienhard Selten, and was proposed by John Forbes Nash, Jr, a Nobel Memorial Prize winner in Economic Sciences.

How does the Trembling Hand Perfect Equilibrium Work?

This concept, when used in a game of cards, can refer to a playing unintentionally playing the wrong card through error (popularly known as tremble). If a player acknowledges the possibility of an error occurring, they can choose a trembling hand perfect equilibrium that will protect them in case their opponent makes a mistake. Trembling Hand Equilibrium can only be chosen before a move is made, and not after the mistake might have occurred. This concept has many uses in different areas, especially in the macroeconomic theory for economic policy.

Related Topics

• Market Structure
• Perfect Competition
• Bidding War
• Complements & Substitutes
• Substitution Effect
• Imperfect Competition
• Market Power
• Price Takers
• Price Makers 
• Perfect Competition and Decision Making
• X-Efficiency
• Captive Market
• Contestable Market Theory
• Highest Profit Point in a Perfectly Competitive Market
• Marginal Revenue
• Using Marginal Revenue and Marginal Costs to Maximize Profit
• Marginal Revenue Curve
• Profit Margin and Average Total Cost
• Break Even Point – Cost Curve
• Shutdown Point – Cost Curve
• Short-Run Decisions Based Upon Costs in a Perfectly Competitive Market
• Marginal Costs and the Supply Curve for a Perfectively Competitive Firm
• Long-Run Average Supply (LRAS)
• Decisions to Enter or Exit a Market in the Long Run
• Long-Run Equilibrium in a Perfectly Competitive Market
• Constant, Increasing, and Decreasing Cost Industries
• Productive and Allocative Efficiency in Perfectly Competitive Markets
• Market Efficiency
• Market Inefficiency
• Pareto Efficiency
• Market Failure 
• Search Theory
• Monopoly
• Natural Monopoly
• Legal Monopoly
• Bilateral Monopoly
• Promoting Innovation through Intellectual Property
• Predatory Pricing
• How Monopolists Set Price with the Demand Curve
• Total Cost and Total Revenue for a Monopolist
• Marginal Revenue and Marginal Cost for a Monopolist
• Inefficiency of Monopoly
• Perfectly Competitive Market
• Monopolistic Competition
• Duopoly
• Oligopoly
• Differentiated Products
• Perceived Demand for a Monopolistic Competitor
• Monopolistic Competitors Choose Price and Quantity
• Monopolistic Competitors and Entry
• Monopolistic Competition and Efficiency
• Cartel (Economics)
• Game Theory
• Traveler’s Dilemma
• Prisoner’s Dilemma
• Iterated Prisoner’s Dilemma
• Nash Equilibrium
• Diner’s Dilemma
• Trembling Hand Perfect Equilibrium
• Gambler’s Fallacy
• Arrows Impossibility Theorem
• Backward Induction
• Tournament Theory
• Oligopoly and the Prisoner’s Dilemma
• Forcing Cooperation in a Prisoner’s Dilemma
• Cooperation and the Kinked Demand Curve
• Corporate Merger or Acquisition
• Antitrust Laws
• Herfindahl-Hirschman Index
• Concentration Ratio
• Other Approaches to Measuring Monopoly Power in an Industry
• Restrictive Practices under Antitrust Law
• Natural Monopoly
• Cost-Plus Regulation
• Price Cap Regulation
• Regulatory Capture