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Variational Preferences and Equilibria in Games under Ambiguous Beliefs Correspondences

Author

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  • Giuseppe De Marco

    (Università di Napoli Parthenope and CSEF)

  • Maria Romaniello

    (Seconda Università di Napoli)

Abstract

In previous papers we studied a game model in which players' uncertainty is expressed entirely in the space of probabilities (lotteries) over consequences, it depends on the entire strategy profile chosen by the agents and it is described by the so called ambiguous beliefs correspondences. In this paper, we extend the previous results by embodying variational preferences in the model. We give a general existence result that we apply to a particular example in which beliefs correspondences depend on the equilibria of specific subgames. Then, we study the limit behavior of equilibria under perturbations on the index of ambiguity aversion.

Suggested Citation

  • 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.
    • Handle: RePEc:sef:csefwp:363
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    References listed on IDEAS

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    1. Lo, Kin Chung, 1996. "Equilibrium in Beliefs under Uncertainty," Journal of Economic Theory, Elsevier, vol. 71(2), pages 443-484, November.
    2. Bade, Sophie, 2011. "Ambiguous act equilibria," Games and Economic Behavior, Elsevier, vol. 71(2), pages 246-260, March.
    3. Fabio Maccheroni & Massimo Marinacci & Aldo Rustichini, 2006. "Ambiguity Aversion, Robustness, and the Variational Representation of Preferences," Econometrica, Econometric Society, vol. 74(6), pages 1447-1498, November.
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    6. Azrieli, Yaron & Teper, Roee, 2011. "Uncertainty aversion and equilibrium existence in games with incomplete information," Games and Economic Behavior, Elsevier, vol. 73(2), pages 310-317.
    7. De Marco, Giuseppe & Romaniello, Maria, 2013. "A limit theorem for equilibria under ambiguous belief correspondences," Mathematical Social Sciences, Elsevier, vol. 66(3), pages 431-438.
    8. David S. Ahn, 2008. "Ambiguity Without a State Space," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 75(1), pages 3-28.
    9. Frank Riedel & Linda Sass, 2014. "Ellsberg games," Theory and Decision, Springer, vol. 76(4), pages 469-509, April.
    10. Marinacci, Massimo, 2000. "Ambiguous Games," Games and Economic Behavior, Elsevier, vol. 31(2), pages 191-219, May.
    11. Eichberger, Jurgen & Kelsey, David, 2000. "Non-Additive Beliefs and Strategic Equilibria," Games and Economic Behavior, Elsevier, vol. 30(2), pages 183-215, February.
    12. Dow James & Werlang Sergio Ribeiro Da Costa, 1994. "Nash Equilibrium under Knightian Uncertainty: Breaking Down Backward Induction," Journal of Economic Theory, Elsevier, vol. 64(2), pages 305-324, December.
    13. Gilboa, Itzhak & Schmeidler, David, 1989. "Maxmin expected utility with non-unique prior," Journal of Mathematical Economics, Elsevier, vol. 18(2), pages 141-153, April.
    14. Stauber, Ronald, 2011. "Knightian games and robustness to ambiguity," Journal of Economic Theory, Elsevier, vol. 146(1), pages 248-274, January.
    15. Friedman, James W. & Mezzetti, Claudio, 2005. "Random belief equilibrium in normal form games," Games and Economic Behavior, Elsevier, vol. 51(2), pages 296-323, May.
    16. Giuseppe De Marco & Maria Romaniello, 2013. "Games Equilibria and the Variational Representation of Preferences," CSEF Working Papers 336, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy.
    17. Wojciech Olszewski, 2007. "Preferences Over Sets of Lotteries -super-1," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 74(2), pages 567-595.
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    Cited by:

    1. Giuseppe De Marco, 2016. "Ambiguous Games without a State Space and Full Rationality," CSEF Working Papers 425, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy, revised 01 Apr 2017.
    2. Giuseppe De Marco & Maria Romaniello, 2015. "On Games and Equilibria with Coherent Lower Expectations," Mathematical Problems in Engineering, Hindawi, vol. 2015, pages 1-8, June.
    3. Giuseppe De Marco, 2019. "On the convexity of preferences in decisions and games under (quasi-)convex/concave imprecise probability correspondences," CSEF Working Papers 523, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy.

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