Minimax regret and strategic uncertainty

Ludovic Renou and Karl H. Schlag

No 08/2, Discussion Papers in Economics from Division of Economics, School of Business, University of Leicester

Abstract: This paper introduces a new solution concept, a minimax regret equilibrium, which allows for the possibility that players are uncertain about the rationality and conjectures of their opponents. We provide several applications of our concept. In particular, we consider pricesetting environments and show that optimal pricing policy follows a non-degenerate distribution. The induced price dispersion is consistent with experimental and empirical observations (Baye and Morgan (2004)).

Keywords: minimax regret; rationality; conjectures; price dispersion; auction (search for similar items in EconPapers)
JEL-codes: C7 (search for similar items in EconPapers)
Date: 2008-01, Revised 2008-04
New Economics Papers: this item is included in nep-gth and nep-upt
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Citations: View citations in EconPapers (4)

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Related works:
Journal Article: Minimax regret and strategic uncertainty (2010)
Working Paper: Minimax regret and strategic uncertainty (2008)
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