Game-theoretic Modeling of Players' Ambiguities on External Factors

Jian Yang

Papers from arXiv.org

Abstract: We propose a game-theoretic framework that incorporates both incomplete information and general ambiguity attitudes on factors external to all players. Our starting point is players' preferences on payoff-distribution vectors, essentially mappings from states of the world to distributions of payoffs to be received by players. There are two ways in which equilibria for this preference game can be defined. When the preferences possess ever more features, we can gradually add ever more structures to the game. These include real-valued utility-like functions over payoff-distribution vectors, sets of probabilistic priors over states of the world, and eventually the traditional expected-utility framework involving one single prior. We establish equilibrium existence results, show the upper hemi-continuity of equilibrium sets over changing ambiguity attitudes, and uncover relations between the two versions of equilibria. Some attention is paid to the enterprising game, in which players exhibit ambiguity seeking attitudes while betting optimistically on the favorable resolution of ambiguities. The two solution concepts are unified at this game's pure equilibria, whose existence is guaranteed when strategic complementarities are present. The current framework can be applied to settings like auctions involving ambiguity on competitors' assessments of item worths.

Date: 2015-10, Revised 2017-04
New Economics Papers: this item is included in nep-cdm, nep-gth, nep-hpe, nep-mic and nep-upt
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://arxiv.org/pdf/1510.06812 Latest version (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:arx:papers:1510.06812

Access Statistics for this paper

More papers in Papers from arXiv.org
Bibliographic data for series maintained by arXiv administrators ().