Ambiguous act equilibria. / Bade, Sophie.

In: Games and Economic Behavior, Vol. 71, No. 2, 03.2011, p. 246-260.

Research output: Contribution to journalArticle

Published

Abstract

A game-theoretic framework that allows for explicitly randomized strategies is
used to study the effect of ambiguity aversion on equilibrium outcomes. The notions of \independent strategies" as well as of \common priors" are amended to render them applicable to games in which players lack probabilistic sophistication. Within this framework the equilibrium predictions of two player games with ambiguity averse and with ambiguity neutral players are observationally equivalent. This equivalence result does not extend to the case of games with more than two players. A translation of the concept of equilibrium in beliefs to the context of ambiguity aversion yields substantially different predictions - even for the case with just two players.
Original languageEnglish
Pages (from-to)246-260
Number of pages15
JournalGames and Economic Behavior
Volume71
Issue number2
Early online date10 May 2010
DOIs
Publication statusPublished - Mar 2011
This open access research output is licenced under a Creative Commons Attribution-NonCommercial-NoDerivs 3.0 Unported License.

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