Robust Robustness

Ian Ball and Deniz Kattwinkel

Papers from arXiv.org

Abstract: The maxmin approach to distributional robustness evaluates each mechanism according to its payoff guarantee over all priors in an ambiguity set. We propose a refinement: the guarantee must be approximately satisfied at priors near the ambiguity set (in the weak topology). We call such a guarantee robust. The payoff guarantees from some maxmin-optimal mechanisms in the literature are not robust. We show, however, that over certain standard ambiguity sets (such as continuous moment sets), every mechanism's payoff guarantee is robust. We give a behavioral characterization of our refined robustness notion by imposing a new continuity axiom on maxmin preferences.

Date: 2024-08, Revised 2024-10
New Economics Papers: this item is included in nep-des and nep-mic
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