Minimax regret and strategic uncertainty

Ludovic Renou and Karl Schlag

Economics Working Papers from Department of Economics and Business, Universitat Pompeu Fabra

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: 2008-04
New Economics Papers: this item is included in nep-gth and nep-upt
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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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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Persistent link: https://EconPapers.repec.org/RePEc:upf:upfgen:1087

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