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Ambiguous act equilibria

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  • Bade, Sophie
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    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.

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    Bibliographic Info

    Article provided by Elsevier in its journal Games and Economic Behavior.

    Volume (Year): 71 (2011)
    Issue (Month): 2 (March)
    Pages: 246-260

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    Handle: RePEc:eee:gamebe:v:71:y:2011:i:2:p:246-260

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    Web page: http://www.elsevier.com/locate/inca/622836

    Related research

    Keywords: Uncertainty aversion Nash equilibrium Ambiguity;

    References

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    Cited by:
    1. Frank Riedel & Linda Sass, 2014. "Ellsberg games," Theory and Decision, Springer, vol. 76(4), pages 469-509, April.
    2. Giuseppe De Marco & Maria Romaniello, 2014. "Variational Preferences and Equilibria in Games under Ambiguous Beliefs Correspondences," CSEF Working Papers 363, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy.
    3. Matthias Lang & Achim Wambach, 2010. "The fog of fraud – mitigating fraud by strategic ambiguity," Working Paper Series of the Max Planck Institute for Research on Collective Goods 2010_24, Max Planck Institute for Research on Collective Goods.

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