Characterization and Computation of Normal-Form Proper Equilibria in Extensive-Form Games via the Sequence-Form Representation

Abstract: Normal-form proper equilibrium, introduced by Myerson as a refinement of normal-form perfect equilibrium, occupies a distinctive position in the equilibrium analysis of extensive-form games because its more stringent perturbation structure entails the sequential rationality. However, the size of the normal-form representation grows exponentially with the number of parallel information sets, making the direct determination of normal-form proper equilibria intractable. To address this challenge, we develop a compact sequence-form proper equilibrium by redefining the expected payoffs over sequences, and we prove that it coincides with the normal-form proper equilibrium via strategic equivalence. To facilitate computation, we further introduce an alternative representation by defining a class of perturbed games based on an $\varepsilon$-permutahedron over sequences. Building on this representation, we introduce two differentiable path-following methods for computing normal-form proper equilibria. These methods rely on artificial sequence-form games whose expected payoff functions incorporate logarithmic or entropy regularization through an auxiliary variable. We prove the existence of a smooth equilibrium path induced by each artificial game, starting from an arbitrary positive realization plan and converging to a normal-form proper equilibrium of the original game as the auxiliary variable approaches zero. Finally, our experimental results demonstrate the effectiveness and efficiency of the proposed methods.