Stochastic dominance equilibria in two-person noncooperative games
Two-person noncooperative games with finitely many pure strategies and ordinal preferences over pure outcomes are considered, in which probability distributions resulting from mixed strategies are evaluated according to t-degree stochastic dominance. A t-best reply is a strategy that induces a t-degree stochastically undominated distribution, and a t-equilibrium is a pair of t-best replies. The paper provides a characterization and existence proofs of t-equilibria in terms of representing utility functions, and shows that for t becoming large-which can be interpreted as the players becoming more risk averse-behavior converges to a specific form of max-min play. More precisely, this means that in the limit each player puts all weight on a strategy that maximizes the worst outcome for the opponent, within the supports of the strategies in the limiting sequenceof t-equilibria.
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Volume (Year): 34 (2006)
Issue (Month): 4 (November)
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- Fishburn, Peter C., 1976. "Continua of stochastic dominance relations for bounded probability distributions," Journal of Mathematical Economics, Elsevier, vol. 3(3), pages 295-311, December.