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The Texas Shoot-Out under Knightian uncertainty

Gerrit Bauch and Frank Riedel

Games and Economic Behavior, 2024, vol. 146, issue C, 35-50

Abstract: We investigate a widely used mechanism to resolve disputes among business partners, known as Texas Shoot-Out, under Knightian uncertainty. For a non-degenerate range of intermediate valuations, an ambiguity-averse divider truthfully reveals their valuation in equilibrium. As a consequence, the resulting outcome is efficient, in contrast to the Bayesian case. With equal shares, both agents prefer ex-ante to be the chooser and would like to avoid triggering the mechanism in the first place.

Keywords: Knightian uncertainty in games; Texas Shoot-Out; Partnership dissolution (search for similar items in EconPapers)
JEL-codes: C72 D74 D81 D82 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:gamebe:v:146:y:2024:i:c:p:35-50

DOI: 10.1016/j.geb.2024.04.009

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