Trembles in extensive games with ambiguity averse players

Gaurab Aryal () and Ronald Stauber ()

Economic Theory, 2014, vol. 57, issue 1, 40 pages

Abstract: We introduce and analyze three definitions of equilibrium for finite extensive games with imperfect information and ambiguity averse players. In a setting where players’ preferences are represented by maxmin expected utility, as characterized in Gilboa and Schmeidler (J Math Econ 18(2):141–153, 1989 ), our definitions capture the intuition that players may consider the possibility of slight arbitrary mistakes. This generalizes the idea leading to trembling-hand perfect equilibrium as introduced in Selten (Int J Game Theory 4(1):25–55, 1975 ), by allowing for ambiguous trembles characterized by sets of distributions. We prove existence for two of our equilibrium notions and relate our definitions to standard equilibrium concepts with expected utility maximizing players. Our analysis shows that ambiguity aversion can lead to behavioral implications that are distinct from those attained under expected utility maximization, even if ambiguous beliefs only arise from the possibility of slight mistakes in the implementation of unambiguous strategies. Copyright Springer-Verlag Berlin Heidelberg 2014

Keywords: Extensive games; Ambiguity; Maxmin; C72; D81 (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (12)

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Working Paper: Trembles in Extensive Games with Ambiguity Averse Players (2013)
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DOI: 10.1007/s00199-014-0828-9

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