A Framework for Robustness to Ambiguity of Higher-Order Beliefs
AbstractThis paper defines simple procedures to construct ambiguous perturbations of belief structures associated to standard type spaces with precise beliefs, based on ambiguous type spaces whose induced belief hierarchies approximate the belief hierarchies corresponding to the initial type space. Two alternative procedures to construct such perturbations are introduced, and are shown to yield a simple and intuitive characterization of convergence of the resulting approximations to the initial unperturbed environment. The perturbations arising from one of these procedures include the set of all finite perturbations as a special case. The introduced perturbations and their convergence properties provide a foundation for the analysis of robustness to ambiguity of various solutions concepts, and for various decision rules under ambiguity.
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Bibliographic InfoPaper provided by Australian National University, College of Business and Economics, School of Economics in its series ANU Working Papers in Economics and Econometrics with number 2013-602.
Length: 29 Pages
Date of creation: Feb 2013
Date of revision:
Find related papers by JEL classification:
- C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
- D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search, Learning, and Information
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-03-02 (All new papers)
- NEP-GTH-2013-03-02 (Game Theory)
- NEP-MIC-2013-03-02 (Microeconomics)
- NEP-UPT-2013-03-02 (Utility Models & Prospect Theory)
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