Belief distorted Nash equilibria: introduction of a new kind of equilibrium in dynamic games with distorted information

Agnieszka Wiszniewska-Matyszkiel

Annals of Operations Research, 2016, vol. 243, issue 1, No 10, 147-177

Abstract: Abstract In this paper the concept of belief distorted Nash equilibrium (BDNE) is introduced. It is a new concept of equilibrium for games in which players have incomplete, ambiguous or distorted information about the game they play, especially in a dynamic context. The distortion of information of a player concerns the fact how the other players and/or an external system changing in response to players’ decisions, are going to react to his/her current decision. The concept of BDNE encompasses a broader concept of pre-BDNE, which reflects the fact that players best respond to their beliefs, and self-verification of those beliefs. The relations between BDNE and Nash or subjective equilibria are examined, as well as the existence and properties of BDNE. Examples are presented, including models of a common ecosystem, repeated Cournot oligopoly, a repeated Minority Game or local public good with congestion effect and a repeated Prisoner’s Dilemma.

Keywords: Distorted information; Noncooperative games; Games with a continuum of players; n-player dynamic games; Nash equilibrium; Belief-distorted Nash equilibrium (BDNE); Pre-BDNE; Subjective equilibrium; Self-verification of beliefs; Common ecosystem; Cournot oligopoly; Competitive equilibrium; Minority Game; Prisoner’s Dilemma (search for similar items in EconPapers)
JEL-codes: C61 C72 D83 D84 Q20 (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (4)

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DOI: 10.1007/s10479-015-1920-7

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