 Ex-post regret heuristics under private values (II): 2×2 gamesRene Saran and Roberto Serrano Journal of Mathematical Economics, 2014, vol. 54, issue C, 112-123 Abstract: When information is hardly available, the role of priors should be limited in robust game-theoretic predictions. We analyze a process of heuristics based on ex-post regret as a guide to understand how to play games of incomplete information with private values. While our dynamics has a strong component of inertia, its key is that with a small probability actions are modified in the direction of ex-post regrets. We apply stochastic stability to identify the strategies that will be used in the long run in 2×2 games (i.e., two players with two actions each). For a class of 2×2 games, which includes quasi-supermodular games satisfying “weak dominance”, the resulting theory predicts cautious behavior in the long run, as stochastically stable strategies are minimax regret equilibria. A minimax regret equilibrium is independent of the beliefs about the opponents’ types and actions (only the supports matter) and suggests a “safe way to play the game”. Keywords: Incomplete information; Ex-post regret heuristics; Bayesian equilibrium; Minimax regret equilibrium; 2×2 games; Quasi-supermodular games (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:mateco:v:54:y:2014:i:c:p:112-123 DOI: 10.1016/j.jmateco.2014.06.004 Access Statistics for this article Journal of Mathematical Economics is currently edited by Atsushi (A.) Kajii More articles in Journal of Mathematical Economics from Elsevier |
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