Strategic Problems with Risky Prospects

Alessandro Santuoso (), Cristina Bicchieri, Alexander Funcke () and Einav Hart ()
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Alessandro Santuoso: Smith Institute for Political Economy and Philosophy, Chapman University
Alexander Funcke: Center for Social Norms and Behavioral Dynamics, University of Pennsylvania
Einav Hart: Center for Social Norms and Behavioral Dynamics, University of Pennsylvania

Working Papers from Chapman University, Economic Science Institute

Abstract: We study games where the impact of strategic uncertainty (i.e., ambiguity arising from uncertainty about other players’ actions and beliefs) is compounded by the simultaneous presence of risky prospects (chance moves with commonly-known conditional probabilities). We embed such games in an experimental environment that allows us to test if risk-taking behavior is affected by information that reduces the extent of strategic uncertainty. In doing so, we test some implications of expected utility theory, while making minimal assumptions about individual-level (risk or ambiguity) attitudes. Our analysis provides evidence for an effect of the information: notably, we find that the effect on choice behavior is triggered in some cases by a rational belief revision about others’ actions, and in other cases by a reversal in risk preferences.

Keywords: Strategic Uncertainty; Risk Preferences; Belief Revision; Mixed-Motive games; Network (search for similar items in EconPapers)
JEL-codes: C72 C92 D81 D83 (search for similar items in EconPapers)
Date: 2020
New Economics Papers: this item is included in nep-cbe, nep-exp, nep-gth, nep-mic, nep-ore and nep-upt
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:chu:wpaper:20-23

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