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Knightian games and robustness to ambiguity

  • Stauber, Ronald
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    This paper introduces a notion of robustness to ambiguous beliefs for Bayesian Nash equilibria. An equilibrium is robust if the corresponding strategies remain approximately optimal for a class of games with ambiguous beliefs that results from an appropriately defined perturbation of the belief structure of the original non-ambiguous belief game. The robustness definition is based on a novel definition of equilibrium for games with ambiguous beliefs that requires equilibrium strategies to be approximate best responses for all measures that define a player's belief. Conditions are derived under which robustness is characterized by a newly defined strategic continuity property, which can be verified without reference to perturbations and corresponding ambiguous belief games.

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    File URL: http://www.sciencedirect.com/science/article/B6WJ3-50XCY91-7/2/29c4397ecd6ded0f29965b3286f90429
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    Article provided by Elsevier in its journal Journal of Economic Theory.

    Volume (Year): 146 (2011)
    Issue (Month): 1 (January)
    Pages: 248-274

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    Handle: RePEc:eee:jetheo:v:146:y:2011:i:1:p:248-274
    Contact details of provider: Web page: http://www.elsevier.com/locate/inca/622869

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