On the Existence of Strategic Solutions for Games with Security- and Potential Level Players

Alexander Zimper

No 04-04, Sonderforschungsbereich 504 Publications from Sonderforschungsbereich 504, Universität Mannheim, Sonderforschungsbereich 504, University of Mannheim

Abstract: This paper examines the existence of strategic solutions for finite normal form games under the assumption that strategy choices can be described as choices among lotteries where players have security- and potential level preferences over lotteries (e.g., Gilboa, 1988; Jaffray, 1988; Cohen, 1992). Since security- and potential level preferences require discontinuous utility representations, standard existence results for Nash equilibria in mixed strategies (Nash, 1950a,b) or for equilibria in beliefs (Crawford, 1990) do not apply. As a key insight this paper proves that non-existence of equilibria in beliefs, and therefore non-existence of Nash equilibria in mixed strategies, is possible in finite games with security- and potential level players. But, as this paper also shows, rationalizable strategies (Bernheim, 1984; Moulin, 1984; Pearce, 1984) exist for such games. Rationalizability rather than equilibrium in beliefs therefore appears to be a more favorable solution concept for games with security- and potential level players.

Pages: 22 pages
Date: 2004-02-06
Note: Financial support from the Deutsche Forschungsgemeinschaft, SFB 504, at the University of Mannheim, is gratefully acknowledged.
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Working Paper: On the existence of strategic solutions for games with security- and potential level players (2004)
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