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Uncertainty aversion and equilibrium existence in games with incomplete information

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  • Azrieli, Yaron
  • Teper, Roee

Abstract

We consider games with incomplete information à la Harsanyi, where the payoff of a player depends on an unknown state of nature as well as on the profile of chosen actions. As opposed to the standard model, playersʼ preferences over state-contingent utility vectors are represented by arbitrary functionals. The definitions of Nash and Bayes equilibria naturally extend to this generalized setting. We characterize equilibrium existence in terms of the preferences of the participating players. It turns out that, given continuity and monotonicity of the preferences, equilibrium exists in every game if and only if all players are averse to uncertainty (i.e., all the functionals are quasi-concave).

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Bibliographic Info

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

Volume (Year): 73 (2011)
Issue (Month): 2 ()
Pages: 310-317

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Handle: RePEc:eee:gamebe:v:73:y:2011:i:2:p:310-317

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

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Keywords: Games with incomplete information; Equilibrium existence; Uncertainty aversion; Convex preferences;

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References

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  1. Fabio Maccheroni & Massimo Marinacci & Aldo Rustichini, 2004. "Ambiguity Aversion, Robustness, and the Variational Representation of Preferences," Carlo Alberto Notebooks 12, Collegio Carlo Alberto, revised 2006.
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  9. John C. Harsanyi, 1967. "Games with Incomplete Information Played by "Bayesian" Players, I-III Part I. The Basic Model," Management Science, INFORMS, vol. 14(3), pages 159-182, November.
  10. Sujoy Mukerji & Jean-Marc Tallon, 2003. "An overview of economic applications of David Schmeidler`s models of decision making under uncertainty," Economics Series Working Papers 165, University of Oxford, Department of Economics.
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  13. Kin Chung Lo, 1998. "Sealed bid auctions with uncertainty averse bidders," Economic Theory, Springer, vol. 12(1), pages 1-20.
  14. Salo, Ahti A & Weber, Martin, 1995. "Ambiguity Aversion in First-Price Sealed-Bid Auctions," Journal of Risk and Uncertainty, Springer, vol. 11(2), pages 123-37, September.
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Cited by:
  1. 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.
  2. Bade, Sophie, 2011. "Ambiguous act equilibria," Games and Economic Behavior, Elsevier, vol. 71(2), pages 246-260, March.
  3. Frank Riedel & Linda Sass, 2014. "Ellsberg games," Theory and Decision, Springer, vol. 76(4), pages 469-509, April.
  4. Riedel, Frank & Sass, Linda, 2013. "Ellsberg Games," Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order 80012, Verein für Socialpolitik / German Economic Association.

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