Insights on the Theory of Robust Games

Giovanni Paolo Crespi, Davide Radi and Matteo Rocca

Papers from arXiv.org

Abstract: A robust game is a distribution-free model to handle ambiguity generated by a bounded set of possible realizations of the values of players' payoff functions. The players are worst-case optimizers and a solution, called robust-optimization equilibrium, is guaranteed by standard regularity conditions. The paper investigates the sensitivity to the level of uncertainty of this equilibrium. Specifically, we prove that it is an epsilon-Nash equilibrium of the nominal counterpart game, where the epsilon-approximation measures the extra profit that a player would obtain by reducing his level of uncertainty. Moreover, given an epsilon-Nash equilibrium of a nominal game, we prove that it is always possible to introduce uncertainty such that the epsilon-Nash equilibrium is a robust-optimization equilibrium. An example shows that a robust Cournot duopoly model can admit multiple and asymmetric robust-optimization equilibria despite only a symmetric Nash equilibrium exists for the nominal counterpart game.

Date: 2020-02
New Economics Papers: this item is included in nep-gth, nep-mic and nep-ore
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