Robustness to strategic uncertainty

Abstract

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Abstract. In games with continuum strategy sets, we model a player's uncertainty about another player's strategy, as an atomless probability distribution over the other player's strategy set. We call a strategy profile (strictly) robust to strategic uncertainty if it is the limit, as uncertainty vanishes, of some sequence (all sequences) of strategy profiles in which every player's strategy is optimal under his or her uncertainty about the others. General properties of this robustness criterion are derived and it is shown that it is a refinement of Nash equilibrium when payoff functions are continuous. We apply the criterion to a class of Bertrand competition games. These are discontinuous games that admit a continuum of Nash equilibria. Our robustness criterion selects a unique Nash equilibrium, and this selection agrees with recent experimental findings. Terms of use: Documents in EconStor may

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“…Decisions under strategic uncertainty has been studied both experimentally (Abbink and Brands, 2008;Feltowich and Swierzbinski, 2011;Andersson et al, 2018) and theoretically (Andersson et al, 2014, Yamashita, 2015. Some works, including Abbink and Brandts (2005) studied the behavior under structural uncertainty, although most of the literature focused on pure effects of the varying market structures (Plott, 1995, Camerer, 2003and Huck et al 2004…”

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