On Hurwicz Preferences in Psychological Games

Giuseppe De Marco (), Maria Romaniello and Alba Roviello
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Giuseppe De Marco: University of Naples Parthenope and CSEF, https://csef.it/people/giuseppe-de-marco/
Maria Romaniello: University Campania Vanvitelli
Alba Roviello: University Campania Vanvitelli

CSEF Working Papers from Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy

Abstract: The literature on strategic ambiguity in classical games provides generalized notions of equilibrium in which each player best responds to ambiguous or imprecise beliefs about hisopponents’ strategy choices. In a recent paper, strategic ambiguity has been extended topsychological games, by taking into account ambiguous hierarchies of beliefs and maxmin preferences. Given that this kind of preference seems too restrictive as a general method to evaluate decisions, in this paper we extend the analysis by taking into account a-maxmin preferences in which decisions are evaluated by a convex combination of the worst-case (with weight a) and the best-case (with weight 1-a) scenarios. We give the definition of a-maxmin Psychological Nash Equilibrium; an illustrative example shows that the set of equilibria is affected by the parameter a and the larger is ambiguity the greater is the effect. We also provide a result of stability of the equilibria with respect to perturbations that involve the attitudes toward ambiguity, the structure of ambiguity and the payoff functions: converging sequences of equilibria of perturbed games converge to equilibria of the unperturbed game as the perturbation vanishes. Surprisingly, a final example shows that existence of equilibria is not guaranteed for every value of a.

Keywords: Psychological games; ambiguous beliefs; a-MEU; equilibrium existence. (search for similar items in EconPapers)
Date: 2022-12-09
New Economics Papers: this item is included in nep-gth and nep-mic
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