Ambiguous Act Equilibria

Sophie Bade ()
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Sophie Bade: Max Planck Institute for Research on Collective Goods, Bonn

No 2010_09, Discussion Paper Series of the Max Planck Institute for Research on Collective Goods from Max Planck Institute for Research on Collective Goods

Abstract: A game-theoretic framework that allows for explicitly randomized strategies is used to study the effect of ambiguity aversion on equilibrium outcomes. The notions of "independent strategies" as well as of "common priors" are amended to render them applicable to games in which players lack probabilistic sophistication. Within this framework the equilibrium predictions of two player games with ambiguity averse and with ambiguity neutral players are observationally equivalent. This equivalence result does not extend to the case of games with more than two players. A translation of the concept of equilibrium in beliefs to the context of ambiguity aversion yields substantially di erent predictions – even for the case with just two players.

Keywords: Uncertainty Aversion; Nash Equilibrium; Ambiguity (search for similar items in EconPapers)
JEL-codes: C72 D81 (search for similar items in EconPapers)
Date: 2010-03
New Economics Papers: this item is included in nep-gth, nep-mic and nep-upt
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Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:mpg:wpaper:2010_09

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