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This paper develops a framework to extend the strategic form analysis of cursed
equilibrium (CE) developed by Eyster and Rabin (2005) to multi-stage games. The
approach uses behavioral strategies rather than normal form mixed strategies and imposes
sequential rationality. We define and characterize properties of cursed sequential
equilibrium (CSE), and apply it to four canonical economic applications: signaling
games, reputation building, durable goods monopoly, and the dirty faces game. These
applications illustrate various implications of CSE, show how and why it differs from
sequential equilibrium and CE, and provide evidence from laboratory experiments that
support the empirical relevance of CSE.
