Trembles in Extensive Games with Ambiguity Averse Players

Gaurab Aryal () and Ronald Stauber ()

ANU Working Papers in Economics and Econometrics from Australian National University, College of Business and Economics, School of Economics

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 (1989), our definitions capture the intuition that players may consider the possibility of slight mistakes, analogous to the intuition leading to trembling-hand perfect equilibrium as introduced in Selten (1975). 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 distinct behavioral implications, even if ambiguous beliefs only arise from the possibility of slight mistakes in the implementation of unambiguous strategies.

Keywords: Extensive games; Ambiguity; Maxmin (search for similar items in EconPapers)
JEL-codes: C72 D81 (search for similar items in EconPapers)
Pages: 28 Pages
Date: 2013-03
New Economics Papers: this item is included in nep-cta, nep-gth, nep-hpe, nep-mic and nep-upt
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Journal Article: Trembles in extensive games with ambiguity averse players (2014)
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